Pillar Two Global Minimum Tax and Reinsurance Explained

Pillar Two Global Minimum Tax: What It Means for Offshore and Intra-Group Reinsurance

Last reviewed: November 2026

The Pillar Two global minimum tax for reinsurance is the OECD GloBE framework that tops up the tax on a large group's reinsurance profits to an effective rate of at least 15% in each jurisdiction. It applies to multinational groups with consolidated revenue of at least EUR 750 million, which covers most global reinsurers and many insurance groups with offshore or intra-group reinsurers.

For decades, placing reinsurance in a low-tax affiliate could lower a group's overall tax rate. Pillar Two, together with Bermuda's new corporate income tax, removes much of that benefit and changes how group reinsurance should be justified.

This guide is for CFOs, heads of tax, CROs and group reinsurance leaders. It is general information, not tax advice, so take professional advice on your own group structure and jurisdictions.

Key Takeaways

• Pillar Two sets a 15% minimum effective tax rate per jurisdiction for groups with revenue of EUR 750 million or more.
• Top-up tax is collected first by a QDMTT in the low-taxed jurisdiction, then by the income inclusion rule and undertaxed profits rule elsewhere.
• Bermuda introduced a 15% corporate income tax from 1 January 2025 for in-scope multinational groups.
• The January 2026 side-by-side package lets eligible groups, including US-parented groups, elect out of the IIR and UTPR, but QDMTTs still apply.
• Intra-group reinsurance must now be justified on capital, diversification and risk grounds rather than tax rate arbitrage.
• GloBE rules require cross-border intra-group transactions to follow the arm's length principle, so treaty pricing needs evidence.

What Is the Pillar Two Global Minimum Tax?

Pillar Two is the OECD/G20 Inclusive Framework's global minimum tax, set out in the Global Anti-Base Erosion (GloBE) Model Rules. The OECD's global minimum tax pages hold the model rules, commentary and administrative guidance.

The rules apply to groups with annual consolidated revenue of at least EUR 750 million. Each jurisdiction's effective tax rate is tested, and any shortfall below 15% becomes top-up tax.

How Is Top-Up Tax Collected?

Top-up tax is collected through three interlocking rules. The order matters for where the cash is paid.

A QDMTT reduces top-up tax under the IIR and UTPR. That is why many low-tax jurisdictions have introduced one: the tax is paid locally rather than abroad.

What Changed With the Side-by-Side Package?

On 5 January 2026, the Inclusive Framework published a side-by-side package. It allows eligible groups whose parent is in a jurisdiction with a qualifying tax regime, currently the United States, to elect out of the IIR and UTPR for fiscal years starting on or after 1 January 2026.

QDMTTs still apply to those groups. The package also added a simplified effective tax rate safe harbour, extended the transitional country-by-country reporting safe harbour by a year, and introduced a substance-based tax incentives safe harbour.

Why Does Pillar Two Matter for Reinsurers?

Pillar Two matters for reinsurers because reinsurance has long been concentrated in low-tax or no-tax hubs. Intra-group reinsurance from high-tax operating companies to those hubs was often part of the group's tax position.

Three features of reinsurance make the rules bite:

1. Mobile profit. Reinsurance moves underwriting profit across borders by contract, without moving many people or assets.
2. Low substance carve-out. The substance-based income exclusion is based on payroll and tangible assets, which reinsurers often have little of relative to profit.
3. Volatile results. Catastrophe years create losses and quiet years create large profits, so effective tax rates swing from year to year.

How Has Bermuda Responded?

Bermuda enacted the Corporate Income Tax Act 2023 in December 2023. According to the Government of Bermuda, corporate income tax took effect from 1 January 2025, administered by the Corporate Income Tax Agency.

The tax is 15% and applies to Bermuda entities of multinational groups with revenue of EUR 750 million or more. Bermuda has also enacted a tax credits regime, so groups need to model how credits are treated under the GloBE rules.

For Bermuda reinsurers in large groups, the main effect is that profits are now taxed locally at a headline 15%. Whether the GloBE effective rate actually reaches 15% depends on differences between the Bermuda tax base and GloBE income.

How Is Top-Up Tax on a Group Reinsurer Calculated?

GloBE top-up tax is calculated per jurisdiction, not per entity. The basic steps are below.

1. Compute GloBE income for all group entities in the jurisdiction, starting from financial accounting profit with GloBE adjustments.
2. Compute adjusted covered taxes for those entities.
3. Effective tax rate = adjusted covered taxes ÷ GloBE income.
4. Top-up percentage = 15% − effective tax rate, if positive.
5. Excess profit = GloBE income − substance-based income exclusion.
6. Top-up tax = top-up percentage × excess profit, less any QDMTT paid.

Because the test is jurisdictional, a group reinsurer's profit is blended with other group entities in the same jurisdiction. A low-taxed reinsurer can be offset by higher-taxed affiliates, or vice versa.

Worked Example: Top-Up Tax on an Intra-Group Reinsurer

The illustration below is simplified and uses USD millions. It is clearly hypothetical, ignores many GloBE adjustments and safe harbours, and is not a calculation for any real jurisdiction.

Facts:

• A non-US-parented insurance group has an intra-group reinsurer in "Jurisdiction X"
• The reinsurer is the group's only entity in Jurisdiction X
• GloBE income of the reinsurer: 200
• Substance-based income exclusion (illustrative): 6

In scenario A, the group's total tax on the reinsurer's 200 rises from 0 to 29.1. In scenario C, the reinsurer pays 30 locally and no top-up tax arises.

Scenario D is the one to watch. A headline 15% rate does not guarantee a 15% GloBE rate, because timing differences, exclusions and credits change the numbers.

The lesson for group CFOs: the tax advantage of a low-tax intra-group reinsurer is largely gone for in-scope groups. The structure now needs to earn its place through capital efficiency, diversification credit and risk management.

The lesson for heads of tax: model the GloBE effective rate, not the statutory rate. Catastrophe-year losses and reserve movements can push the rate well above or below 15% from one year to the next.

When Does an Intra-Group Reinsurer Still Make Sense?

An intra-group reinsurer still makes sense where it delivers capital, diversification or operational value that would exist at a 15% tax rate. The table maps common situations to the likely conclusion.

Our piece on trapped capital across legal entities covers the capital side of the same decision.

Which Pillar Two Mistakes Do Reinsurance Groups Make?

Six mistakes recur as groups adapt their reinsurance structures. Most come from treating Pillar Two as a tax-only project.

How Should Groups Review Their Reinsurance Structure?

A structured review brings tax, capital and reinsurance together. The data request and questions below are a practical starting point.

What Data Does the Review Need?

Which Questions Should the Board Ask?

• Which intra-group treaties would we keep if every jurisdiction taxed at 15%?
• What is the GloBE effective rate of each reinsurance jurisdiction in a cat year and in a quiet year?
• Does the side-by-side package apply to our group, and which domestic taxes still bite?
• Is intra-group pricing supported by external benchmarks?
• Where do concentrations of reinsurance assets and counterparties now sit?

For the concentration view, see asset-intensive reinsurance concentration by counterparty and jurisdiction. For jurisdictional mapping, see the offshore reinsurance map.

How Does Pillar Two Interact With Capital and Regulation?

Pillar Two changes the after-tax cost of capital held in different jurisdictions. A group reinsurer in a newly taxed hub now earns a lower after-tax return on the same capital.

Regulators still assess intra-group reinsurance on solvency, counterparty and governance grounds. Restructuring for tax reasons can trigger regulatory approval, collateral or recapture considerations.

Deferred tax also matters. New or higher local taxes create deferred tax assets and liabilities that affect solvency and rating agency capital, so CFOs should model both together.

What Does the Market Look Like Now?

With GloBE information return filing under way and Bermuda's CIT in its second year, groups are moving from impact studies to steady-state compliance. The side-by-side package has reduced exposure for US-parented groups but not removed domestic minimum taxes.

The Inclusive Framework continues to issue administrative guidance and has committed to review the side-by-side system in 2029. Groups should confirm the current rules in every relevant jurisdiction before restructuring.

Checklist for Group CFOs and Heads of Tax

Use this checklist when reviewing group reinsurance under Pillar Two.

• Each reinsurance jurisdiction's GloBE effective rate is modelled for both cat and quiet years
• Side-by-side eligibility, QDMTT exposure and local taxes are mapped for every entity
• Bermuda CIT position, including tax credits, is modelled on a GloBE basis
• Intra-group treaties have arm's length pricing support
• Each intra-group treaty is justified on capital, diversification or operational grounds
• Restructuring options are checked for regulatory approval and collateral effects
• Treaty-level premiums, claims and commissions reconcile to entity accounts
• Intra-group treaty data sits in a controlled system, not spreadsheets

For the last point, a centralised reinsurance treaty management platform keeps intra-group terms and settlements alongside external treaties.

Key Terms

Pillar Two: The OECD/G20 Inclusive Framework's global minimum tax, applying a 15% minimum effective rate to large multinational groups.

GloBE rules: The Global Anti-Base Erosion Model Rules that set out how Pillar Two income, taxes and top-up tax are calculated.

QDMTT: A qualified domestic minimum top-up tax, collected locally under rules aligned with GloBE.

Income inclusion rule (IIR): The rule that charges a parent entity for top-up tax on its low-taxed subsidiaries.

Undertaxed profits rule (UTPR): The backstop rule that allocates remaining top-up tax to other jurisdictions where the group operates.

Substance-based income exclusion: A carve-out from excess profit based on payroll and tangible assets in the jurisdiction.

Side-by-side package: The January 2026 Inclusive Framework package allowing eligible groups, currently US-parented ones, to elect out of the IIR and UTPR.

Bermuda CIT: Bermuda's 15% corporate income tax for in-scope multinational groups, effective from 1 January 2025.

Sources

• OECD: Global Anti-Base Erosion Model Rules (Pillar Two)
• OECD: Global minimum tax
• Government of Bermuda: Bermuda Corporate Income Tax
• Corporate Income Tax Agency, Bermuda