Insurance Around The World

Luxembourg

Luxembourg has long been recognised as an important international financial centre and it is the second largest fund administrator in the world.

Insurance is one of the three main components of its economic structure, alongside banking and the steel industry, and there are over 100 insurance companies located in the Grand Duchy - the majority of these are subsidiaries of large international groups.

Part of the appeal of the country is the stable political and social environment it offers, while over the years a reserve of experts has been developed and this is reflected in the multilingual and multicultural workforce.

The insurance industry in Luxembourg is strictly regulated, as all businesses wishing to operate in the sector need to be approved by the relevant minister. The reason behind this is to guarantee the financial solidity of the insurance companies accepted into the country.

The CAA (Commissariat aux Assurances), a public body under ministerial authority, is the regulator of the insurance industry. Up to 90 per cent of business carried out in Luxembourg is actually with companies outside of the country.

Life insurance

Life insurance is responsible for the bulk of deals in the insurance sector. In 1994, the government transposed into national law the third generation of EU Directives, which established the country as the first pan-European centre for life insurance.

Something that elevates the Grand Duchy above its competitors is the fact lawmakers, decision-makers and regulators enjoy a relationship of mutual understanding with businesses, while they are also located nearby. Because of this, important decisions can be taken quickly and effectively, while everyone can rely on there being a stable and friendly business environment.

Moreover, customers can expect a unique level of protection and flexibility when it comes to contract design and asset management and complete tax neutrality. Both subscribers and beneficiaries can enjoy the tax rate of their country of residence, while Luxembourg typically enjoys favourable tax treatment in most European countries.

A key selling point is the so-called Triangle of Security, a series of measures that protects policyholders. Under the country’s laws, insurance companies have to hold policyholders’ savings in an approved credit institution, which is known as a depositary bank. There must also be a legal segregation of the policyholders’ assets from the insurance company’s assets.

This means that deposits are separate from those of the life insurer itself, so they are ring-fenced in case an insurance company fails. This ensures all assets remain in the name of the policyholder at all times and cannot be touched by the insurance company or its creditors.

There are also clear rules on how life insurers must set up clients’ portfolios. For example, discretionary asset managers are not allowed to have a relationship with the end client. Indeed, the rules and regulations covering the way life insurance portfolios can operate runs to 40 pages.

Reinsurance

Since 1984, Luxembourg has been able to offer reinsurance after the creation of a specific legal framework to regulate this activity. Thanks to the country’s global reputation, this sector has been able to grow significantly over the years. Today, around 250 reinsurance companies are located in the Grand Duchy, with the majority belonging to major international industrial, commercial or financial groups.

Luxembourg is constantly trying to develop its insurance and reinsurance industry, as it seeks to take advantage of the excellent financial infrastructure - which covers legal, accounting and other professional services - it has in place. This, coupled with its excellent geographic location and highly-skilled workforce, makes it a very attractive proposition for customers looking to take out reliable insurance policies.