Munich Re unlikely to be affected by Trump administration protectionist policies

Munich Re is unlikely to be directly affected by the US president’s protectionist policies, CFO Jörg Schneider suggested during a Feb. 7 press conference.

Following his overarching slogan “America first,” President Donald Trump may raise tariffs, introduce border taxes that penalise imports relative to exports, or potentially both.

The President has already signed an executive action to withdraw from the negotiating process of the Trans-Pacific Partnership which he believes to be harmful to American workers and manufacturing. Trump is also planning to renegotiate NAFTA (North American Free Trade Agreement) with Mexico and Canada.

“I don’t think our business operations will be hit,” Schneider said. He noted that Munich Re is operating in the US via a subsidiary based in New Jersey and other domestic reinsurers. “Therefore we don’t expect a significant negative effect,” he said.

Instead, “the position of insurers operating from low-tax jurisdictions may become more complicated,” he noted.

A border adjustment tax (BAT) could radically change the way companies are levied, taxing imports and exempting exports. This could potentially affect insurers headquartered in Bermuda and operating in the US.

Munich Re, on the other hand, may even benefit from the Trump government’s plan to reduce its federal corporate tax rate to around 15-25 percent as it operates in the US via subsidiaries.

Currently, the US has some of the highest corporate tax rates in the world at 35 percent, nearly double the UK rate of 20 percent.

“Should taxes be reduced in the US this would be good for our business,” Schneider said.

Experts estimate that such a fiscal stimulus is likely to boost economic growth.

“If it results in economic growth, we would benefit as a strong US reinsurer,” Schneider said.

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