Insurance Industry Briefing
24th February 2021
Luxembourg Financial Industry
Life Insurance Industry
Tax and Compliance
Demography & Pension Trends
P&C Industry in Luxembourg
Life Industry Regulation and Trends
Luxembourg Financial Industry
Tax Justice Network describes Luxembourg’s steps to tackle corporate tax avoidance as insufficient

Luxembourg ranks among the three countries in continental Europe, along with Switzerland and the Netherlands, whose laws make it easiest for multinationals to avoid paying tax, giving big groups an unfair advantage over rivals with fewer resources, according to pressure group Tax Justice Network. Spokesman Luke Holland and Luxembourg group member Jean-Sébastien Zippert acknowledge that the grand duchy has taken steps to curb tax avoidance, but multinationals continue to exploit tax loopholes unavailable to smaller businesses, which country-by-country tax reporting is needed to curb. They argue that it is a risk for Luxembourg's economy to be too dependent on financial services, saying it limits the country's ability to take independent decisions.

Best source: Le Quotidien (in French)
Parliament approves legislation to curb aggressive tax planning

The Chamber of Deputies has approved legislation limiting the tax deductibility of outgoing payments to countries and territories listed by the EU as unco-operative in tax matters. The bill was drawn up in March last year to clarify the conditions for dealing with such blacklisted jurisdictions in line with EU rules. Finance minister Pierre Gramegna says that the legislation demonstrates the country’s commitment to take action against aggressive tax planning structures.

Best source: Delano
Handling dormant assets requires action on legal framework: ACA’s Marc Hengen

Marc Hengen, CEO of Luxembourg insurance association ACA, says that handling of inactive safety deposit boxes and dormant insurance contracts is currently down to each company's case-by-case approach, saying the enactment of long-stalled draft legislation would provide greater legal clarity in dealing with dormant assets. Foyer underwriter Benoît Royer says the attribution of assets can run smoothly when key information is available in a clear format, but difficulties arise if designation clauses have been drafted vaguely, and the cross-border nature of business adds to complications.

Best source: Paperjam (in French)
Former CAA head among three new appointments to Luxembourg Central Bank governing council

The government has approved the appointment of Michèle Detaille, Aline Muller and Claude Wirion to the nine-member council of the Luxembourg Central Bank, succeeding Pit Hentgen, Romain Schintgen and Claude Zimmer, whose terms have expired. There are now four women on the council, which is chaired by Gaston Reinesch, the bank’s governor since 2013. The council's role is to formulate policy, as well as oversee the central bank's accounts and annual reports, and supervise the executive board headed by Reinesch as director-general.

Best source: Paperjam (in French)
See also: Delano
Life Insurance Industry
German traditional life yields fall to 2.14%: Assekurata

Low interest rates pushed the average yield of German traditional life insurance policies to 2.14% last year, down from 2.29% in 2019, according to Assekurata. The rating agency finds that only 25 of 47 insurers surveyed still offer the guaranteed policies, and they accounted for just 14% of new sales. It describes traditional policies as obsolete, with the market now dominated by products with higher profit potential but increasingly no or only partial guarantees. The study also estimates that German life insurers had to set aside around €11bn for the country’s additional interest reserve last year, up from €9.5bn in 2019.

Best source: Procontra-Online (in German)
See also: Versicherungswirtschaft-Heute (in German)
See also: Assekurata (in German)
French life net inflows turn positive for first time since February

French life insurers closed one of the worst years for the industry on a positive note, reporting €550m of net inflows in December, the first inflows since February. Gross inflows amounted to €12.8bn, including €4.7bn to unit-linked contracts, while gross outflows totalled €12.3bn, according to the Federation Française de l'Assurance. For the whole of 2020, net outflows set a record of €6.5bn, compared with net inflows of €21.9bn the previous year, mainly due to a sharp fall in gross inflows. The share of unit-linked inflows rose from 28% in 2019 to 34%, amounting to €40.1bn.

Best source: Les Echos (subscription required, in French)
See also: Le Figaro (in French)
See also: Federation Française de l'Assurance (in French)
Belgian tax authority to levy inheritance tax on life policies within couples

Belgium’s tax authority Service Public Fédéral Finances has ruled that surviving spouses must pay inheritance tax on half the value of life policies held by their deceased partners, ending a long-established exemption. In addition, the change is retroactive to September 2018, when a reform to the country’s law of matrimonial regimes entered into force. The order violates the principle of legality in tax matters and will likely spark court challenges, according to lawyers.

Best source: L'Echo (in French)
See also: Service Public Fédéral Finances
Italian families increasingly investing in life savings policies: Ania

The proportion of the financial wealth of Italian families invested in traditional life insurance policies increased from 5% to 18.2% between 1999 and 2019, reaching more than €770bn, according to industry body Ania. The share compares with 5.8% in the Netherlands, 7.8% in Spain, 16.2% in Germany and 35.5% in France, where life savings exceed €2.1trn. The figures exclude assets within unit-linked contracts, which reached €178bn in Italy.

Best source: Wall Street Italia (in Italian)
See also: Ania (in Italian)
Tax and Compliance
Newly-disclosed documents increase suspicion over former Deutsche executive’s role in cum-ex trades

Newly-disclosed documents from 2007 appear to implicate Garth Ritchie, Deutsche Bank's former head of investment banking until his departure in 2019, in cum-ex trades being investigated by Cologne prosecutors. An internal expert report from 2007 explained that German tax authorities would make a refund for dividend taxes that were never paid, enabling the bank to profit without any risk, and Ritchie was subsequently reported to have endorsed the strategy. He is one of about 70 former Deutsche executives on the list of possible defendants in the cases, which involve fraudulent tax refunds arising from share trades around the dividend payment date.

Best source: Handelsblatt (subscription required, in German)
France extends scheme rewarding whistleblowers for tax evasion information

France’s economy and finance ministry has issued a decree extending indefinitely a scheme rewarding individuals who supply information that helps to curb tax evasion and fraud. A two-year pilot trial enabled the country's tax authorities to recover around €100m, with payments of up to €1m granted in cases involving at least €100,000 in tax losses. Following an initial parliamentary report on the programme, an updated study is scheduled to be published before the summer.

Best source: Le Figaro (in French)
EU to spare Turkey from tax haven blacklist again

The EU is set to give Turkey more time to fulfil its commitments on tax transparency without being added to the union's tax haven blacklist. Ecofin is expected to set another deadline for the country next week after an initial extension expired at the end of December. The Ankara authorities are accused of failing to comply with global standards on the automatic exchange of information for tax purposes, an issue that particularly affects member states with a large Turkish-origin community such as Germany.

Best source: AFP (in French)
Demography & Pension Trends
Panama Papers inquiries lead to recovery of €72m in tax and penalties in Germany

Analysis of the Panama Papers has enabled tax authorities in Germany to recover €72m in unpaid tax and penalties to date, according to Hesse finance minister Michael Boddenberg. He says the leaked documents led to the recovery of more than €38.4m in additional tax and €19m from criminal cases, as well as a further €14.6m thanks to data sent abroad. Overall, the documents have prompted or supported around 155 criminal cases across Germany. Hesse’s tax authority was responsible for analysis of the around one million files involving some 3,000 shell companies and 1,000 individuals, along with the federal criminal police office.

Best source: dpa (in German)
German cabinet approves amendment to money laundering law

The German cabinet has approved a draft amendment to the country’s money laundering law including an expansion of its registry of beneficial ownership to all companies and an increase in exchange of information with other countries. Finance minister Olaf Scholz says the enhanced registry will make it easier to see through deliberately complex and artificial company structures and identify beneficiaries of transactions. The proposals would also enhance co-operation between German investigators and authorities in other EU member states and ease the transfer of information from Germany’s federal criminal police office to Europol.

Best source: Dow Jones (in German)
See also: dpa (in German)
P&C Industry in Luxembourg
Insurers’ body ACA looks at options for protection against pandemic risks

Marc Hengen, managing director of Luxembourg insurance industry body ACA, says that it has met Finance Ministry officials to discuss ways of insuring against the risk posed by pandemics, which are not currently covered by policies in the grand duchy. Insurance coverage of business risks in Luxembourg currently encompasses fire, storms and water damage, but not illnesses or closure by administrative orders. The ACA has created a working group to address the issue of health-related risks, but Hengen says purely private insurance coverage, including lockdown measures, is currently unfeasible given companies' level of resources. The group is assessing the French system of compensation for natural disasters, in which responsibility is shared between insurers, the state and an industry solidarity fund.

Best source: Paperjam (in French)
Non-life insurance claims normalising as rates rise: Fitch

Fitch sees varied outlooks for non-life insurance markets around the world this year due to the positive impact of normalising claim levels and further rate rises in several key lines, but also the negative impact of economic pressure on premium revenues and asset quality. The rating agency also identifies a worsening sector outlook for most life markets in 2021, reflecting an increased risk of fallout from the Covid-19 pandemic as the effects of defaults, write-downs and even lower interest rates are felt more strongly.

Best source: Fitch Ratings
Luxembourg behavioural analytics firm and software provider Adacta partner on insurance risk profiling

Slovenia-based insurance software provider Adacta has partnered with Motion-S, a Luxembourg provider of data-driven behavioural analytics, to offer a telematics-based risk profiling platform for insurers. The Motion-S system aims to provide data to facilitate the development of usage-based insurance polices, and the two companies are already working on a proof of concept for a fully comprehensive motor insurance product with premium adjusted according to information from the client's risk profile. Motion-S CEO German Castignani says its technology enables insurance companies to increase retention rates, increase sales and improve communication with clients.

Best source: InFinance
Life Industry Regulation and Trends
Outlook for French life insurers worsening in 2021: Fitch

The outlook for French life insurers this year is worsening because the negative impact of the Covid-19 pandemic is expected to be more pronounced than in 2020, mainly due to interest rates being kept lower for longer, according to Fitch. The rating agency sees low rates adding to the pressure on life insurers' earnings, capitalisation and the long-term sustainability of traditional business models. It says the pandemic has obliged insurers to accelerate their multi-year transition to a capital-light model, despite intense competition and French savers’ risk aversion, and expects the trend toward reduced sales of traditional policies to continue while unit-linked business remains resilient.

Best source: Fitch Ratings
EIOPA’s concerns about unit-linked products intensify amid Covid-19 pandemic

European insurance regulator EIOPA says its concerns about unit-linked products have intensified due to the initial impact of the Covid-19 pandemic. In its latest consumer trends report, the supervisor highlights that structural problems linked to the products such as high costs, high risk and complexity can be exposed by early surrenders when holders face unexpected liquidity needs. EIOPA also notes that lower returns and market volatility can intensify these issues and potentially affect consumers significantly. EIOPA had already classified unit-linked products as among the riskiest for clients early last year.

Best source: EIOPA
French parliament to examine fresh proposal to cut life policy tax benefits

The finance committee of France’s lower house of parliament will this week discuss the latest proposal to align the taxation of inheritances and life insurance policies, after rejecting similar plans in December. The draft bill was submitted by 39 Socialist MPs, who highlight the excessive tax benefits for premiums paid by policyholders before the age of 70. Similar proposals were drafted by 56 MPs late last year and by the Democratic Movement party, the country’s third largest group in parliament and an ally of president Emmanuel Macron, in October 2019.

Best source: Mieux Vivre Votre Argent (in French)
See also: Assemblée Nationale (in French)