Private Life Insurance Prospectives 2016

This year European markets bring us a lot of opportunities to monitor.

Specially in Italy where the inheritance tax regime is under revision. The tax exemption should reduce and the tax rate should increase. As a consequence, Life Insurance market should benefit from major appeal.

The Italian Voluntary Disclosure has taxed about €42billion in Switzerland, more than €1billion in Luxembourg and more than €4billion in Monaco. Life Insurance might benefit from these assets where the life insurance bond is definitely adapted for foreign wealth management.

Finally, Art Finance and Art Insurance are always more present in our world and Italy is one of the most Art populated country in Europe. Our dedicated team of Wealth Engineers is focused on providing evolving asset protection solution and we believe it will play an important role in the market this year.

A new era of Asset Protection is born. A new definition of Asset Protection is born. In effect, the Bail-In has entered into force on January 1st. This leads us to enlighten again how asset protection is relevant and has bigger extension than what we have believed until today. Not only we may protect ourselves from creditors but we must also pay attention to our providers. The right choice will protect ourselves from bad surprises such as the Etruria Case. European Life Insurance regulation submit Life Insurers to specific and strong controls. They must segregate their third party accounts and report constantly to Auditors and Control Authorities. Subscribers benefit from the health of the Life Insurer and the question about the Bail-In is shifted from the Bank toward the Life Insurer. Therefore, may a Life Insurance Bond protect us from a Bail-In situation? Definitely yes.

Also, new products are born such as Multi Supports (guaranteed and not guaranteed Life Insurance Bond) and Capital Protection Bond. These products are definitely useful when financial markets suffer from high volatility. Capital protection and multi supports insurance bond will benefit from lots of interest this year in all European Markets.

Donations are also one of the methods of assets transfer gaining position in the wealth context these days. Life Insurance Bond is a new entry by the non-profit organization where this instrument remain reversible and flexible versus the donation. Let’s keep an eye close on this growing market which should play a significant role in the next years.

On the other hand, the French market has publicized mid-December the conditions under which redeeming in kind an Insurance Bond. This way the French market benefits from more certainties and cleared field.

Again, a new type of Life Insurance Bond is born in Luxembourg where the Commissariat aux Assurances, with its Circular 15/3, has created the FAS (‘Fonds d’assurance spécialisé’). This allows the subscriber to define the asset allocation of his Insurance Bond. This is definitely of great interest on the French market.

As regards to corporate subscribers, the Luxembourg Capitalization Bond, offering a dedicated fund management bond without insured person, might also encounter and answer the requirements of this growing, and bigger than forecast, market.

From an intermediation point of view, we must enlighten the evolution of European Directive 2002/92 EC. The directive has been reviewed and recast by the European Parliament and the European Council. The so-called « Insurance Distribution Directive 2 » (‘IDD2’) is born on December 14th 2015 and is about to be publicized on the Official Journal. EC members have two years to transpose the new regulation in National law; mostly by mid-2017. Impacts are important, also for Insurers submitted to the brokerage rules such as, among others:

• extending the scope to cover all sales of insurance products, whether by insurance intermediaries or insurance undertakings, including proportionate requirements for those who sell insurance products on an ancillary basis;
• identifying, managing and mitigating conflicts of interest;
• strengthening administrative sanctions, as well as measures to be applied in the event of a breach of key provisions;
• enhancing the suitability and objectiveness of insurance advice;
• mandatory disclosure at the pre-contractual stage by insurance intermediaries of the nature and basis (but not amount) of remuneration received;
• ensuring that sellers’ professional qualifications match the complexity of the products they sell;
• clarifying the procedure for cross-border market entry.

Still on the intermediation side of the business, the M&A market of insurers has also to be monitored as intermediation operation will definitely be necessary with the involved  subscribers coping with the change of their insurance company. On this point, some news may come soon from the Luxembourg market. Let’s stay tuned!

Last but not least, we would like to remind the judgment of the European Court of Justice of March 1st 2012 which has stated that : « ..contracts which are ‘unit-linked’ or ‘linked to investment funds’, such as that concluded by Mr González Alonso, are common in insurance law. Thus, the European Union legislature took the view that that type of contract falls within a class of life assurance, as is clear from Annex I, point III to the Life Assurance Directive, read in conjunction with Article 2(1)(a) of that directive ».
This judgment reinforces the Life Insurance characters of these products and thus reinforces its civil and fiscal regime into force.

Lorenzo Stipulante – Partner International – GHILS (Global Hub for Insurance & Loan Solution)