In a significant policy shift, the Inland Revenue Authority of Singapore (IRAS) has revised the tax treatment for general insurers’ reserves against incurred but not reported (IBNR) claims.
Historically, these reserves were non-deductible because they were regarded as estimates of contingent liabilities. However, following representations from the Monetary Authority of Singapore (MAS) and consideration of international rulings, IRAS has now updated its stance.
Under the new guidelines, IRAS will permit these provisions for tax deduction, provided they are supported by reliable statistical methods, such as the loss triangulation method. Additionally, alternative methods have been made available for insurers that are unable to gather historical data.
These updated guidelines are designed to encourage sound insurance practices while ensuring adherence to tax regulations.
