New guidance on taxation of the insurance premiums that U.S. insurers cede to foreign insurers and reinsurers could have some effect on life insurers.

The Internal Revenue Service appears to be referring mainly to property-casualty insurers in the guidance, in IRS Revenue Ruling 2008-15, which appeared on the IRS Web site March 7.

In the guidance, IRS officials rule that an insurer must pay an excise tax every time insurance premiums are ceded to a foreign insurer or reinsurer

A U.S. broker, policyholder or insurer can escape the excise tax requirement only if the non-U.S. insurer or reinsurer gets an excise tax closing agreement establishing its eligibility for a waiver under a U.S. income tax treaty, officials say.

To ease compliance, the IRS will give insurers and reinsurers who have not complied with the law until Oct. 1 to file voluntarily, officials write.

The IRS analysis of the excise tax requirements refers mainly to property-casualty coverage, but a provision of the Internal Revenue Code does impose a 1% federal excise tax on each life insurance, sickness and accident policy, or annuity contract ceded to a foreign insurer or reinsurer.

The guidance seems to clarify existing case law and private letter rulings on the issue of the applicability of the excise tax on foreign-to-foreign reinsurance transactions, says Steve Brostoff, a spokesman for the American Council of Life Insurers, Washington.

“The primary impact appears to be on property-casualty insurers,” Brostoff says. “We are still assessing its impact, if any, on life insurers.”