Non-life Insurance Gaining Strong Momentum

Luxembourg’s traditional strengths in the insurance sector have been in the life and reinsurance domains – however, as a result of the UK’s decision to leave the European Union, Luxembourg is taking on an increasingly important role as a major European hub for non-life insurance.

With more than 9 billion euros of direct collected premiums in the international non-life sector, Luxembourg recorded unprecedented growth of +236% in 2019. All these new insurance players have further consolidated the three main areas of business: General liability, Property and Credit which account for a total market share of 90% of Luxembourg’s international non-life business.

The greater part of the insurance business written in Luxembourg finds a market in continental Europe and Luxembourg’s central location at the heart of the EEA is certainly a competitive edge. The country has a long record for financial and political stability and an experienced and well-respected dedicated insurance regulator expert in cross-border insurance solutions.

The multinational make-up of the Grand Duchy’s workforce also helps insurance firms tackle the cultural and linguistic barriers to marketing cross-border financial and corporate insurance services in other European member states.

Whilst some insurers have set up subsidiaries in Luxembourg to ensure continued access to the EU internal market, other global players have decided to use Luxembourg as a complementary financial hub to reinforce specific links in their global value chain, such as their capital market activities. In such cases, the Grand Duchy is not pursuing a strategy of enticing firms away from their current domicile. Luxembourg’s approach is one of highlighting its potential role as a complementary financial hub to a firm’s existing base of operations. In this way, Luxembourg’s financial sector cluster supports global insurers access new EU markets by leveraging the country’s thriving and well-established financial ecosystem.

The non-life insurance industry is fundamental for the wellbeing of banks, businesses and financial institutions and also for the effective functioning of capital markets. Insurers provide financial companies with insurance coverage for their credit and financial risks while developing complex financial products which are capable of creating intertwined connections between banking and insurance financial instruments.

Insurers traditionally transfer the credit risks they insure against, either by directly accessing capital markets using financial instruments and derivatives or resort to reinsurance vehicles.

Insurance-Linked Securities (ILS) are financial instruments designed to transfer various types of insurance risks onto the capital markets. As growth in the global demand for insurance has exceeded that of traditional reinsurance schemes, insurers and reinsurers are increasingly tapping into the ILS market. ILS provide help insurers diversify their portfolios and so safely navigate periods of financial market distress.