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Taxation
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Taxation TAXATION
Under current Bermuda law, RenaissanceRe and its Bermuda subsidiaries are not subject to any income or capital gains taxes. In the event that such taxes are imposed, RenaissanceRe and its Bermuda subsidiaries would be exempted from any such tax until March 2035 pursuant to the Bermuda Exempted Undertakings Tax Protection Act 1966, and Amended Acts of 1987 and 2011, respectively.
RenaissanceRe Finance and its subsidiaries are subject to income taxes imposed by U.S. federal and state authorities and file a consolidated U.S. federal income tax return. Should the U.S. subsidiaries pay a dividend to RenaissanceRe, withholding taxes would apply to the extent of current year or accumulated earnings and profits at an expected tax rate of 5.0%. The Company also has operations in Ireland, the U.K., Singapore, Switzerland and Australia which are subject to income taxes imposed by the respective jurisdictions in which they operate. Withholding taxes would not be expected to apply to dividends paid to RenaissanceRe from its subsidiaries in Ireland, the U.K., Singapore, Switzerland and Australia.
The following is a summary of the Company’s income (loss) before taxes allocated between domestic and foreign operations:
Year ended December 31,202120202019
Domestic
Bermuda
$156,031 $1,122,261 $861,068 
Foreign
Singapore
4,420 16,416 (6,334)
Ireland
101 1,315 (388)
U.S.
(92,335)286 102,724 
Australia
7,148 (1,689)3,390 
Switzerland
(106,249)(40,502)14,255 
U.K.
(83,224)(102,167)(7,233)
Income (loss) before taxes$(114,108)$995,920 $967,482 
Income tax (expense) benefit is comprised as follows:
Year ended December 31, 2021CurrentDeferredTotal
Total income tax (expense) benefit$(992)$11,660 $10,668 
Year ended December 31, 2020   
Total income tax (expense) benefit$(6,313)$3,451 $(2,862)
Year ended December 31, 2019   
Total income tax (expense) benefit$(2,128)$(15,087)$(17,215)
The Company’s expected income tax provision computed on pre-tax income (loss) at the weighted average tax rate has been calculated as the sum of the pre-tax income (loss) in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate. Statutory tax rates of 0.0% in Bermuda, 21.0% in the U.S., 12.5% in Ireland, 19.0% in the U.K., 17.0% in Singapore, 19.7% in Switzerland and 30.0% in Australia have been used.
The Company’s effective income tax rate, which it calculates as income tax expense divided by net income before taxes, may fluctuate significantly from period to period depending on the geographic distribution of
pre-tax net income (loss) in any given period between different jurisdictions with comparatively higher tax rates and those with comparatively lower tax rates. The geographic distribution of pre-tax net income (loss) can vary significantly between periods due to, but not limited to, the following factors: the business mix of net premiums written and earned; the geographic location, the size and the nature of net claims and claim expenses incurred; the amount and geographic location of operating expenses, net investment income, net realized and unrealized gains (losses) on investments; outstanding debt and related interest expense; and the amount of specific adjustments to determine the income tax basis in each of the Company’s operating jurisdictions. In addition, a significant portion of the Company’s gross and net premiums are currently written and earned in Bermuda, which does not have a corporate income tax, including the majority of the Company’s catastrophe business, which can result in significant volatility to its pre-tax net income in any given period.
A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate is as follows:
Year ended December 31,202120202019
Expected income tax benefit (expense)$53,093 $25,489 $(22,874)
Nondeductible expenses(334)5,074 (7,059)
Reinsurance adjustment(4,604)— — 
Income tax audit adjustment— 3,424 — 
Effect of change in tax rate14,904 3,055 (262)
Transfer pricing224 206 2,503 
GAAP to statutory accounting difference— — 6,553 
U.S. base erosion and anti-abuse tax(1,725)(36)— 
Withholding tax(1,013)(1,822)(665)
Non-taxable loss on sale of RenaissanceRe UK— (6,091)— 
Change in valuation allowance(42,819)(13,003)(5,481)
Foreign branch adjustments(5,491)(17,821)7,315 
Other(1,567)(1,337)2,755 
Income tax benefit (expense) $10,668 $(2,862)$(17,215)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
At December 31,20212020
Deferred tax assets
Tax loss and credit carryforwards$149,739 $128,561 
Unearned premiums36,962 20,854 
Reserve for claims and claim expenses22,611 14,983 
Deferred finance charges17,962 11,427 
Deferred underwriting results12,483 7,228 
Accrued expenses1,788 4,826 
Amortization and depreciation6,969 — 
 248,514 187,879 
Deferred tax liabilities
Investments(2,180)(23,598)
Deferred acquisition expenses(49,661)(23,040)
Intangible assets(4,242)(1,142)
Amortization and depreciation— (1,130)
VOBA— (1,017)
 (56,083)(49,927)
Net deferred tax asset (liability) before valuation allowance192,431 137,952 
Valuation allowance(131,507)(88,688)
Net deferred tax asset (liability)$60,924 $49,264 
The Company’s net deferred tax asset is included in other assets on its consolidated balance sheets.
During 2021, the Company recorded a net increase to the valuation allowance of $42.8 million (2020 – increase of $13.0 million, 2019 – increase of $40.4 million). The Company’s net deferred tax asset primarily relates to net operating loss carryforwards and GAAP versus tax basis accounting differences relating to unearned premiums, reserves for claims and claim expenses, deferred finance charges, deferred underwriting results, accrued expenses, investments, deferred acquisition expenses, intangible assets, amortization and depreciation and VOBA. The Company’s valuation allowance assessment is based on all available information including projections of future GAAP taxable income from each tax-paying component in each tax jurisdiction.
A valuation allowance has been provided against deferred tax assets in the U.S., Ireland, the U.K., Singapore and Switzerland. These deferred tax assets relate primarily to net operating loss carryforwards.
In the U.S. and Switzerland, the Company has net operating loss carryforwards of $333.7 million and $476.2 million respectively. Under applicable law, the U.S. and Swiss net operating loss carryforwards will begin to expire in 2031 and 2022 respectively. The Company has net operating loss carryforwards of $142.2 million in the U.K., $13.6 million in Singapore, $6.5 million in Ireland and $1.3 million in Australia. Under applicable law, the U.K., Singapore, Irish and Australia net operating losses can be carried forward for an indefinite period.
The Company had a net refund for U.S. federal, Irish, U.K., Singapore, Switzerland and Australia income taxes of $(4.3) million for the year ended 2021 (2020 – net payment of $5.7 million, 2019 – net payment of $9.7 million).
The Company has unrecognized tax benefits of $Nil as of December 31, 2021 (2020 – $Nil). Interest and penalties related to unrecognized tax benefits would be recognized in income tax expense. At December 31, 2021, interest and penalties accrued on unrecognized tax benefits were $Nil (2020 – $Nil). The following filed income tax returns are open for examination with the applicable tax authorities: tax years 2018 through 2020 with the IRS; 2017 through 2020 with Ireland; 2019 through 2020 with the U.K.; 2017 through 2020 with Singapore; 2019 and 2020 with Switzerland; and 2017 through 2020 with Australia. The
Company does not expect the resolution of these open years to have a significant impact on its consolidated statements of operations and financial condition.