Reinsurers prevail over IRS

In a victory for the reinsurance industry, in May the DC Circuit Court of Appeals ruled in favour of Validus Reinsurance, affirming that extraterritorial application of US law prevents the imposition of the federal excise tax on a reinsurance transaction between two foreign reinsurers. The decision, Validus v US, is likely to spell the end of the Internal Revenue Service (IRS) ‘cascading’ excise tax theory.