INSURANCE IN LUXEMBOURG

Before the second half of the 1980s, the insurance sector in Luxembourg was largely focused on the domestic market. With the gradual development of the European internal insurance market and the introduction of the freedom of services regime at the beginning of the 1990s, the Luxembourg insurance market witnessed significant growth, with foreign insurance companies establishing significant operations in the country. The development of the reinsurance business started in Luxembourg with the introduction of the reinsurance law in 1984. This provided large multinationals and financial institutions seeking reinsurance with a stable and reliable regulatory environment. The Grand Duchy of Luxembourg has nurtured its international and European insurance and reinsurance ecosystems ever since, resulting in its position today as one of the main cross-border insurance and reinsurance centres in Europe.

Stability is the cornerstone of any leading insurance business. The insurance sector in Luxembourg has grown hand in hand with Luxembourg’s financial centre, benefiting from its political, economic and fiscal stability and a triple-A rating from all major rating agencies (S&P, Moody’s and Fitch).

As with banks and investment funds, insurance companies rely on Luxembourg’s international talent pool and its unique cross-border financial expertise. These highly skilled multilingual insurance professionals work alongside a workforce experienced in investment fund management.  The insurance industry has easy access to all those skills which are so key to the sector, such as risk selection, underwriting and analytics.

Insurance sales teams in Luxembourg speak the client’s language, providing insurance products tailored to clients’ specific needs across the EU, fully in line with local regulations and tax laws. Long-standing cross-border insurance expertise, combined with a competent dedicated regulator results in world-class international wealth solutions and innovative insurance and reinsurance products for demanding corporate and retail clients.

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.

The recent introduction of the European Solvency II regime in 2016 substantially changed the Luxembourg regulatory framework for the insurance and reinsurance sector. The regime harmonised the pan-European supervisory system and related insurance regulations. The legislation addresses the amount of capital that European insurance and reinsurance companies must hold to reduce the risk of insolvency. At the EU level, regular reviews of the Solvency II regime have been undertaken since its implementation to ensure it remains fit for purpose.

Luxembourg’s insurance regulator the CAA is a public institution, operating under the authority of the Luxembourg Ministry of Finance. It is exclusively in charge of the supervision of the insurance and reinsurance industry in Luxembourg. Its overriding goal is to ensures optimal protection for all subscribers.