The insurance sector employs around 4,500 people in Luxembourg, according to the ACA, with 280 companies active in the sector. Insurers and re-insurers collected €57bn in contributions and paid €398m in taxes. 

Representing the sector in the grand duchy, the ACA issued the following list of demands for candidates running in the October parliamentary election, which will determine the shape of the next government, to take into consideration.

Reforming professional secrecy

Professional secrecy is a “brake on the development of Luxembourg insurers’ activities,” the ACA said. On the one hand, because it “prevents them from responding to requests from foreign authorities in the countries of distribution,” which forces Luxembourg managers “to expose themselves to criminal proceedings by violating either Luxembourg or foreign law.”

On the other hand, because it makes the use of intra-group subcontracting or via cloud service providers “complex and limited for market players with a stock of life insurance contracts,” which also affects, through a “chain contamination” effect, insurance groups active with several companies. This is about 86% of the ACA’s members.

The association is therefore proposing to include in the law an exemption from professional secrecy for requests for personal data from foreign authorities. And to amend the law on the insurance sector to allow the outsourcing of service providers, intra-group, extra-group and cloud services.

Attracting talent

Four measures could help tackle the current talent shortage in the sector, according to the ACA:

-   “Bringing the educational and housing offer closer to the needs of the sector, and promoting university training in Luxembourg.” This includes revising the University of Luxembourg’s bachelor and master programmes, creating a master’s degree in actuarial science, adapting the university’s funding and governance bodies to “better reflect the importance of the financial sector,” and launching a public-private partnership to create affordable housing for young people.

-   “Modernise the supplementary pension scheme” to “provide a fair social savings tool” that will enable employers to attract talent.

-   “Develop a harmonised tax environment for teleworking.” For the ACA, the tax thresholds (19 to 34 days depending on the country of residence) should be aligned “at least with the social security threshold” (25% of the time worked at home).

-   “Giving flexibility by using labour law as a priority.” The ACA does not want to change the weekly working time, but wants to allow it to be adapted over an annual reference period. In this way, companies facing peaks of activity at certain times of the year could distribute the workload accordingly.

Avoiding over-regulation

“European initiatives range from a reform of Solvency II to the introduction of ESG criteria and rules of behaviour. Each of these regulations has a reason to be justified by the general interest, but their combination and the desire to regulate everything in the slightest detail considerably increase the administrative burden, while the benefits for policyholders and insured persons remain limited,” the ACA said.

It called for “compliance with the transposition principle of ‘the whole directive and nothing but the directive’.”

Specialised regulator

The ACA insists on the importance of maintaining a specialised regulator and favours the status quo in this area. “The fundamental differences between the banking and insurance sectors can only be taken into account if there is a dedicated regulator for each.”

A model that has been “a decisive factor in the choice to relocate more than 10 insurance firms following Brexit.”

Group pensions and individual provision

To cope with an ageing population, the use of supplementary group pension and individual provident schemes should be encouraged, according to the ACA. It proposes to “modernise the collective supplementary pension scheme,” with an increase in the eligible payment thresholds, as well as the introduction of a reduced flat rate tax for employees under 40 years of age and a relaxation of the cases of early exit. And finally to create a sustainable Luxembourg pension product with increased tax deductible limits.

Combat non-insurance

“In the absence of car insurance, it is up to the community to compensate accident victims, through the Fonds de Garantie Automobile,” the ACA said. To combat this lack of insurance, “the police should be able to access an electronic insurance register to check whether motorists have taken out compulsory car insurance.”

Levelling the playing field

“The various supplementary health insurance schemes have an important role to play in meeting actual medical costs, beyond the intervention of the CNS. Health costs are rising and the number of private health insurance contracts is steadily increasing,” the ACA said. It therefore wants to “avoid confusion between different players in the same sector of activity and restore healthy and fair conditions of competition.”

Freedom to provide services

The last two issues raised by the ACA have a European scope. It wants the principle of the freedom to provide services and the maintenance of the supervision of (re)insurance companies by the home country regulator to be defended at the European level.

“Luxembourg insurance is fundamentally atypical. It is characterised by a very strong preponderance of international life and non-life insurance, which will account for 95% of total premiums collected by Luxembourg insurance companies in 2021.”

Promoting the financial centre

The last request is to “maintain and strengthen actions to promote the financial centre and communicate on the distribution markets of Luxembourg (re)insurers.” Clear, precise and coordinated communication with the help of Luxembourg for Finance will help to minimise uncertainty and hesitation on the part of international clients towards Luxembourg, it said.