HB1481, the Catastrophic Risk Transfer Act of 2025 (the “CART Act”), would create a new federal tax regime for “catastrophic risk transfer companies,” a type of domestic special-purpose insurer or reinsurer organized under state law and regulated by state insurance officials. The bill is aimed at entities that issue securities and enter into fully collateralized insurance or reinsurance contracts covering low-probability, high-severity risks, including certain property catastrophe risks and mortality/longevity risk pools. It defines these companies narrowly and requires that most of their income come from investment income and premiums tied to qualifying catastrophic-risk transactions.
The bill would add a new Part V to Subchapter M of the Internal Revenue Code and establish how these companies are taxed, including rules for dividends paid deductions, limits on net operating loss use, treatment of earnings and profits, and special procedures if a company fails the gross-income test. It also creates pass-through style tax treatment for security holders by requiring companies to identify the character of dividends as attributable to interest, capital gains, insurance premiums, or other income categories. In addition, the bill provides withholding-tax exemptions for certain qualified investment income dividends paid to nonresident aliens and foreign corporations, subject to exceptions.
Beyond federal tax changes, HB1481 would also affect state premium taxation of reinsurance. It would bar taxing jurisdictions other than the company’s state of organization from imposing premium taxes on reinsurance premiums paid to or received by these companies, and it would cap any permitted state premium tax at the level that would apply to a foreign insurer or reinsurer under existing federal tax rules. This would likely reduce tax burdens on qualifying catastrophe-risk vehicles and encourage their formation in states that authorize special-purpose insurers.
The general sentiment reflected by the bill’s structure is supportive of expanding and clarifying the market for catastrophe risk transfer, with an emphasis on ensuring sufficient capital to cover catastrophic insurance losses. There is no recorded committee transcript or vote history in the provided materials, so no direct floor or committee sentiment is available. However, the bill’s detailed eligibility rules and collateralization requirements suggest an effort to balance market facilitation with regulatory safeguards.
The main points of potential contention are likely to involve tax treatment, state revenue impacts, and the scope of eligible risks and entities. State and local governments may object to the premium-tax preemption, while insurers or reinsurers outside the special-purpose framework may view the bill as creating preferential treatment. Other possible concerns include the complexity of the new tax rules, the treatment of securities holders, and whether the bill could encourage financial structures that shift risk without enough oversight.
HB1481 would amend the Internal Revenue Code to create a new tax classification and operating rules for catastrophic risk transfer companies, including special tax treatment for the companies themselves and for their investors. It would also preempt or limit certain state and local premium taxes on reinsurance premiums involving these entities, thereby affecting state insurance-tax authority and the economics of catastrophe bonds, sidecars, and similar risk-transfer structures.
No committee transcript or vote record was provided, so there is no documented debate history to measure support or opposition. Based on the bill text, the measure appears intended to promote catastrophe-risk financing while imposing collateralization, licensing, and income-source requirements, suggesting a generally pro-market but regulated approach. The absence of recorded votes or hearings means sentiment can only be inferred from the bill’s design, not from legislative discussion.
Likely areas of contention include the bill’s preemption of premium taxes outside the company’s home state, which could reduce revenue for other jurisdictions, and the preferential tax treatment afforded to a specialized class of insurers/reinsurers and their security holders. Stakeholders may also disagree over whether the bill’s definitions are too narrow or too broad, whether the $25 million catastrophic-loss threshold is appropriate, and whether the federal tax rules sufficiently protect against abuse while still encouraging capital formation for catastrophe coverage.