The current proposed amendments to the EU savings directive are not a targeted “crackdown” on offshore bonds. They are a package of amendments that attempts to address perceived gaps in the current EUSD. Certain classes of unit-linked life insurance are only one of the savings media identified in the proposals, which also include proposals on collective investment funds, structured products and national savings products.
The class of life insurance being discussed is strictly limited to interest-bearing investments or structured products “wrapped” in a linked life insurance contract. This is a tiny proportion of the market, often driven by fund managers. The EUSD only deals with interest, direct or capitalised, not any other form of investment return.
The proposals for life insurance, if implemented, would also include “onshore” unit-linked policies where a policyholder moves to another EU country with a policy in force that he had purchased from a domestic insurer. This means there is a potentially greater impact on onshore insurers than those operating cross-border, as they will need to build reporting systems for a very small number of mobile policyholders.
Cross-border insurers support any initiative that discourages tax evasion but believe that extension of the EUSD to life insurance products is unnecessary as they already exist in a regime of tax disclosure.
For example, if a UK resident surrenders an Irish policy, the Irish insurer will automatically report any chargeable event to HMRC. Similar provisions exist in most major EU states. Ailo member companies operating within the EEA do so in a fully compliant manner with all domestic rules and, where required or instructed, report all policy gains and returns to the relevant authorities, not simply the interest element.
The insurance industry, through Ailo and other bodies representing organisations operating both domestically and cross-border, are currently working within the EU to get this message across and are making excellent progress in doing so.
The director of the DG Taxud Directorate of the Commission has made it clear it is not the intention of the EUSD to try to regulate the whole of the EEA unit linked life industry – domestic, branch or freedom of services.
Even if the proposals are implemented unamended, we do not agree with the sentiment expressed in the article that the proposals will make unit-linked life insurance any less attractive to the end-user. Life insurance is a well established method of legitimate retirement and estate planning throughout the EU and any moves to counter tax evasion will only strengthen insurance propositions.
Finally, the latest draft proposals remove all references to a minimum biometric risk.
Chairman and CEO
Association of International Life Offices