Compliance news

Non-life insurance can be considered to be one of the most regulated businesses in the world.

It is common knowledge that well over 140 countries in the world do not allow insurance activities to exist within their borders unless a local legal entity has been established. In addition to which there needs to be a local operational license, the granting of which is subject to the legal presence having the required solvency capital. This is not the only requirement that insurers have to comply with.

Even within European Union, where one passport should allow non-life insurers to provide services cross border, there are e.g. mandatory lines that limits the options for centralized and flexible risk management. Moreover, local standard terms and conditions and many other practical issues may also apply.

If P&C has through own offices and a network of international insurance partners in 150 countries covered your risks all over the world. We also actively search out a partner that best suits your needs when you enter a market in which you are not already present. Our partners are top ranked amongst their peers in most markets.

Insurance premium taxation (IPT) in European Economic Area (EEA)

A major trend in recent years has involved the introduction of new and increased premium-related taxes. For example, the current taxes have meanwhile been increased in the UK and France. In addition, the number of tax audits is increasing, with clients' internal allocations being reviewed and insurance premium allocation may be dimensioned in proportion to cross border insurance solutions.

The only exemption is Romania, which recently decided to decrease the payments applicable to locally established insurers. Let us see what is announced at the year-end. All premium related taxes in EEA are calculated, accounted and remitted by If as direct insurer (local of cross border insurance solutions) or our local partners.


This year we have a very special celebration: Finnish IPT has now 50th anniversary. It was supposed to be a temporary tax, but currently it has the highest overall tax rate in Europe at 24%. It hits all entities insuring risks located in Finland. In a case the insurer is a third country company (outside EU/EEA), the client becomes liable to report and pay the IPT.


Slovakia introduced 2017 a new 8 % IPT which covers all lines of non-life line business.

The Netherlands

The Netherlands has recently issued a new law. The most interesting part concerns co-insurance as according to Dutch legislation the leading coinsurer should handle the IPT. In The Netherlands that is the case, however, the new law has tightened the specific conditions pertaining to this. In the Dutch market, however, also the broker may be subject to obligations to pay IPT. 

IPT in coinsurance solutions has been argued in the industry as some insurers consider IPT payment as a liability of the leading insurer, others argue for the other way around. It is evident, that each country has its own set of rules or the rules are silent on this issue.


In recent circular the local tax administration confirms that tax cannot be paid back on return premiums as tax should be returned on refunded premium as technically it is not due. This practice is similar to Italy. 

Foreign Account Tax Compliance Act (FATCA), new obligations 

The Foreign Account Tax Compliance Act (FATCA) is a U.S. law aimed at preventing  tax avoidance by U.S. taxpayers through the use of offshore accounts. It entered into force in July 2014. Since then well over 100 countries have now signed up to Intergovernmental Agreements (IGAs) with the US to implement FATCA.

Premium payment from US For non-life and risk life insurance (other than life savings) FATCA was not a huge burden at the beginning. It applied to risk premiums paid from the US to a foreign entity. Based on this US insurers, brokers and direct clients have requested the so called W-8BEN-E form that discloses the foreign insurer’s status.

In the event that no such form is furnished, the US withholding agent (i.e. local insurer, broker or client) has an obligation to withhold 30% from the insurance premium paid to off shore insurer. If P&C has naturally delivered the requested forms and is therefore compliant with FATCA.

A US source risk has a wide definition.

New obligations, US-source risks

As from the 1st January 2017, the transitional period for the FATCA regulation lapsed and it now also applies to foreign to foreign insurance premium payments in regards to US source risks. A US source risk has a wide definition.

A quick answer is when the insured property or person is, or can be, based in the US. Currently the London market brokers and some US origin brokers have reacted to this new rule and have communicated it to their clients and advised their clients to consider with their tax and compliance advisors how they may be impacted by FATCA. Also a few of the big four accounting entities have published letters around this issue, especially in the UK.

If's FATCA compliance

If P&C is compliant and If's clients/brokers can be compliant as well with the said amended regulation. Under FATCA, all of the If Group's entities and their branch offices are considered to be Non-Financial Foreign Entities that are subsidiaries of a listed entity.

If provides W-8BEN-E forms, which disclose and prove its status under FATCA on request. In order to facilitate requests for the receipt of the information, W-8BEN-E forms for all of the If Group entities
are also made available to you online

Federal excise tax (FET)

FET is a tax imposed on insurance premium payments from the US to offshore insurers: 4 percent on direct premiums and 1 percent on reinsurance premiums. If P&C has entered into a so called closing agreement with IRSD, a US tax administration and all of the insurance premiums paid to If P&C are exempt
from this tax based on the US double tax treaty with Sweden.

A list of approved companies and countries is published on IRS web pages  (

E.g. Norway and Denmark are not in the list of eligible countries, but branch offices locating in these countries may be covered by the exemption granted to the head office.

Reinsurers have closely followed the so-called Validus case, which removed FET from foreign-to-foreign reinsurance transactions in connection with the socalled cascading effect. According to advice received by If, this will not, however, remove the FET obligations of direct insurers or first-layer reinsurers to calculate
FET in cases where reinsurance premiums are ceded to a non-tax treaty country.

OECD Base Erosion and Profit Shifting (BEPS)

An OECD project to avoid double nontaxation has proceeded rapidly and is important to all international businesses. It has raised concerns to export business and I'm sure this has been closely followed by the tax departments. The assessment of its implementation and importance to insurance business is
ongoing. The original proposal was even stricter in regards to insurance activities than the final versions.

Perhaps two issues could be highlighted at this stage. Firstly, it is claimed that the number of registered
permanent establishments will increase. Secondly, as regards international groups and captive solutions, even more attention needs to be paid to the allocation of income.

Article by

Jari Ostrovskij

Tax councel, If