Free movement of services is a tremendous advantage for any company offering financial services across the EU. Luxembourg has positioned itself extremely well to multinational financial institutions looking for a base in continental Europe to access the EU single market.
The Freedom of Services regime, introduced by the third EU life and non-life insurance directives and transposed into Luxembourg legislation in 1992, has been a key building bloc in the creation of a Single Market for the EU insurance industry. It provides for a single system for the authorisation and financial supervision of insurance companies by the Member State in which they have their head office.
The EU freedom of services regime gives us flexibility in terms of providing solutions to our customers. We have a European company with operations all over Europe and we can service our clients out of Luxembourg. About 60% of our EU business is cross-border.
This single authorisation (“European passport”) issued by the home Member State provides EU-incorporated insurance and reinsurance companies with EU passporting rights, allowing them to carry on their insurance and reinsurance businesses anywhere in the EU. Insurance businesses can either open an agency or branch in an EU member state under EU rules of establishment or, under freedom of services rules, they can provide services without having to be established in each jurisdiction in which they wish to operate.
When an insurance or reinsurance company has its headquarters in Luxembourg it is supervised by the separate and dedicated insurance regulator, the Commissariat aux Assurances (CAA). The legislative framework applicable to insurance contracts distributed in other EU countries by Luxembourg insurers is the one where the contracts are sold, i.e. the country of residence of the subscriber. Consequently, these contracts benefit from the comfort of a familiar framework in terms of language, marketing, contract law and tax legislation. Under Luxembourg legislation, life insurance policies are designed to fully comply with the legal and tax requirements of the subscriber‘s country of residence.
Luxembourg insurance professionals have developed a unique level of cross-border expertise in this field over the past three decades. The multijurisdictional expertise and multilingualism of the Luxembourg insurance industry and workforce allow insurers to tackle the legal, cultural and linguistic idiosyncrasies of all EU Member States from a “one-stop shop” at the heart of Europe.
Luxembourg insurers tailor their products to the specific requirements of each different European market. By centralising core insurance functions (underwriting, claims and investments) in the Grand Duchy of Luxembourg, European and international insurers benefit from significant economies of scales while reducing the compliance costs of having to set up entities in each separate EU jurisdiction in which they operate.
INSURANCE:
A LEADING FINANCIAL CENTRE IN EUROPE
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Insurance in Luxembourg
The Luxembourg financial centre provides a wide range of financial services, acting as a bridge between global investors and markets.
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Freedom of Services in the EU
The Freedom of Services regime, introduced by the third EU life and non-life insurance directives and transposed into Luxembourg legislation.
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A Dedicated Insurance Regulator
The recent introduction of the European Solvency II regime in 2016 substantially changed the Luxembourg regulatory framework for the insurance and reinsurance sector.
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An International Life Insurance Hub in Europe
Luxembourg is the leading financial centre for the distribution of cross-border life insurance products in the Eurozone.
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Non-life Insurance Gaining Strong Momentum
Luxembourg’s traditional strengths in the insurance sector have been in the life and reinsurance domains.
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Luxembourg Reinsurance
Luxembourg is the largest captive reinsurance market in the EU. International companies from all over the world have established around 200 reinsurance undertakings in the Grand Duchy.
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Future Challenges for the Insurance Industry
The companies that make up the insurance industry together make up the largest group of institutional investors in Europe.
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