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Taxation
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Taxation Taxation
Under Swiss law through December 31, 2021, a resident company is subject to income tax at the federal, cantonal, and communal levels that is levied on net worldwide income. Income attributable to permanent establishments or real estate located abroad is excluded from the Swiss tax base. Furthermore, participation relief (i.e., tax relief) is granted to Chubb Limited at the federal, cantonal, and communal level for qualifying dividend income. Chubb Limited is subject to an annual cantonal and communal capital tax on the taxable equity of Chubb Limited in Switzerland.

Chubb has two Swiss operating subsidiaries, an insurance company, Chubb Insurance (Switzerland) Limited and a reinsurance company, Chubb Reinsurance (Switzerland) Limited. Both are subject to federal, cantonal, and communal income tax and to annual cantonal and communal capital tax.

Under current Bermuda law, Chubb Limited and its Bermuda subsidiaries are not required to pay any taxes on income or capital gains. If a Bermuda law were enacted that would impose taxes on income or capital gains, Chubb Limited and the Bermuda subsidiaries have received written assurances from the Minister of Finance in Bermuda that would exempt such companies from Bermudian taxation until March 2035.

Income from Chubb's operations at Lloyd's is subject to United Kingdom (U.K.) corporation income taxes. Lloyd's is required to pay U.S. income tax on U.S. connected income written by Lloyd's syndicates. Lloyd's has a closing agreement with the Internal Revenue Service (IRS) whereby the amount of tax due on this business is calculated by Lloyd's and remitted directly to the IRS. These amounts are then charged to the accounts of Chubb's Corporate Members in proportion to their participation in the relevant syndicates. Chubb's Corporate Members are subject to this arrangement but, as U.K. domiciled companies, will receive U.K. corporation tax credits for any U.S. income tax incurred up to the value of the equivalent U.K. corporation income tax charge on this income.

Chubb Group Holdings and its respective subsidiaries are subject to income taxes imposed by U.S. authorities and file a consolidated U.S. Federal income tax return. Should Chubb Group Holdings pay a dividend to Chubb Limited, withholding taxes
would apply. Currently, however, no withholding taxes are accrued with respect to such un-remitted earnings as management has no intention of remitting these earnings. Similarly, no taxes have been provided on the un-remitted earnings of certain foreign subsidiaries (Hong Kong and Korea life insurance companies) as management has no intention of remitting these earnings. The cumulative amount that would be subject to withholding tax, if distributed, as well as the determination of the associated tax liability are not practicable to compute; however, such amount would be material.

Certain international operations of Chubb are also subject to income taxes imposed by the jurisdictions in which they operate.

Chubb's domestic operations are in Switzerland, the jurisdiction where we are legally organized, incorporated, and registered. As a result of Swiss federal tax reform which was effective in 2020, the tax rate changed from 7.83 percent to 21.2 percent and further changed in 2021 to 19.7 percent due to Cantonal tax rates.

The following table presents pre-tax income and the related provision for income taxes:
Year Ended December 31
(in millions of U.S. dollars)202120202019
Pre-tax income:
      Switzerland$349 $350 $440 
      Outside Switzerland9,467 3,812 4,809 
      Total pre-tax income$9,816 $4,162 $5,249 
Provision for income taxes
Current tax expense:
      Switzerland$65 $52 $29 
      Outside Switzerland1,294 876 879 
      Total current tax expense1,359 928 908 
Deferred tax expense (benefit):
      Switzerland(15)2 11 
      Outside Switzerland(67)(301)(124)
      Total deferred tax expense (benefit)(82)(299)(113)
Provision for income taxes$1,277 $629 $795 

The most significant jurisdictions contributing to the overall taxation of Chubb are calculated using the following rates in 2021: Switzerland 19.7 percent, U.S. 21.0 percent, U.K. 19.0 percent, and Bermuda 0.0 percent.

The following table presents a reconciliation of the difference between the provision for income taxes and the expected tax provision at the Swiss statutory income tax rate:
Year Ended December 31
(in millions of U.S. dollars)20212020 2019 
Expected tax provision at Swiss statutory tax rate$1,934 $880 $411 
Permanent differences:
Taxes on earnings subject to rate other than Swiss statutory rate(740)(337)376 
Tax-exempt interest and dividends received deduction, net of proration(38)(41)(49)
Net withholding taxes78 67 40 
Other43 60 17 
Provision for income taxes$1,277 $629 $795 
The following table presents the components of net deferred tax assets and liabilities:
December 31
(in millions of U.S. dollars)2021 2020 
Deferred tax assets:
Loss reserve discount$950 $884 
Unearned premiums reserve544 496 
Foreign tax credits156 222 
Provision for uncollectible balances32 46 
Loss carry-forwards139 123 
Debt related amounts70 69 
Compensation related amounts178 281 
Cumulative translation adjustments28 120 
Investments— 75 
Lease liability111 121 
Depreciation190 — 
Total deferred tax assets 2,398 2,437 
Deferred tax liabilities:
Deferred policy acquisition costs679 522 
Other intangible assets, including VOBA1,268 1,425 
Un-remitted foreign earnings121 77 
Investments144 — 
Unrealized appreciation on investments360 957 
Depreciation— 123 
Lease right-of-use asset100 111 
Other, net23 31 
Total deferred tax liabilities 2,695 3,246 
Valuation allowance92 83 
Net deferred tax liabilities$(389)$(892)

The valuation allowance of $92 million and $83 million at December 31, 2021 and 2020, respectively, reflects management's assessment, based on available information, that it is more likely than not that a portion of the deferred tax assets will not be realized due to the inability of certain non-U.S. subsidiaries to generate sufficient taxable income. Adjustments to the valuation allowance are made when there is a change in management's assessment of the amount of deferred tax assets that are realizable.

At December 31, 2021, Chubb has net operating loss carry-forwards of $461 million which, if unused, will expire starting in 2022, and a foreign tax credit carry-forward in the amount of $156 million which, if unused, will expire starting in 2026.

The following table presents a reconciliation of the beginning and ending amount of gross unrecognized tax benefits:
Year Ended December 31
(in millions of U.S. dollars)2021 2020 
Balance, beginning of year$76 $47 
Additions based on tax positions related to the current year— 5 
Additions based on tax positions related to prior years7 24 
Reductions for settlements with taxing authorities(19)— 
Balance, end of year$64 $76 

At December 31, 2021 and 2020, the gross unrecognized tax benefits of $64 million and $76 million, respectively, can be reduced by $26 million and $31 million, respectively, associated with foreign tax credits. The net amounts of $38 million and
$45 million at December 31, 2021 and 2020, respectively, if recognized, would favorably affect the effective tax rate. It is reasonably possible that over the next twelve months, that the amount of unrecognized tax benefits may change further resulting from the re-evaluation of unrecognized tax benefits arising from examinations by taxing authorities and the lapses of statutes of limitations.

Chubb recognizes accruals for interest and penalties, if any, related to unrecognized tax benefits in Income tax expense in the Consolidated statements of operations. Tax-related interest expense and penalties reported in the Consolidated statements of operations were $1 million, $8 million, and $5 million at December 31, 2021, 2020, and 2019, respectively. Liabilities for tax-related interest and penalties in our Consolidated balance sheets were $14 million and $16 million at December 31, 2021 and 2020, respectively.

In March 2017, the IRS commenced its field examination of Chubb Group Holdings’ U.S. Federal income tax returns for 2014 and 2015 which is still ongoing. In July 2020, the IRS commenced its field examination of Chubb Group Holdings' U.S. Federal income tax returns for 2016, 2017 and 2018 which is also still ongoing. No material adjustments have been proposed by the IRS for any year under examination. As a multinational company, we also have examinations under way in several foreign jurisdictions. With few exceptions, Chubb is no longer subject to income tax examinations for years prior to 2011.

The following table summarizes tax years open for examination by major income tax jurisdiction:
At December 31, 2021
Australia2015-2021
Canada2012-2021
France 2019-2021
Germany2015-2021
Italy2011-2021
Mexico2014-2021
Spain2012-2021
Switzerland2016-2021
United Kingdom2015-2021
United States2014-2021