Where To Set Up A Unit Linked Life Insur

Journal of Insurance and Financial Management, Vol.
5, Issue 2 (2022) 23-73
Where to Set Up a Unit Linked Life Insurance

Company in Europe
Andreas Svoboda a,*
a
Fernfachhochschule Schweiz (FFHS), Associated to The University of Applied Sciences and Arts of Southern
Switzerland (SUPSI)
ARTICLE INFO ABSTRACT

Article History The insurance industry is one of the profitable and advanced business
sectors. The sector has stood the test of time as strong, sustainable
Submitted 12 Dec 2021
and stable investment of the years. Yet, before considering such an
Accepted 14 Dec 2021 investment, it is vital to engage in industry analysis and develop a
Available online 17 Jan 2022 proper understanding of the opportunities, challenges and drivers of
growth. The current report analyses the European Market with
JEL Classification respect to unit-linked insurance plans (ULIP) with a special focus on
G22 Luxembourg, whether the country is the best for such an insurance
O52 investment. A cross-comparison is done with Ireland and
F30 Liechtenstein in areas like assets managed, life insurance covers,
value premiums, general country profile (including laws, taxation,
M13
quality of life, availability of professionals, GDP, and the regulatory
environment). The data is collected from existing reports and surveys
Keywords (country and industry reports). Overall, Luxembourg emerges as the
Unit-Linked Life Insurance best candidate for ULIP, a country reportedly having the right
Luxembourg professional base, multilingual and multicultural. When compared to
Ireland and Liechtenstein, Luxembourg is the best fit for ULIPs or
Insurance
any wealth insurance because it serves as an insurance and financial
Premiums hub or centre not only for Europe but the world at large. Ease of
Investment doing business is excellent for Luxembourg and registering a
company provides more advantages than Ireland and Liechtenstein.
Luxembourg encourages cross-border employment and attracts
expertise, professional, and skills from multilingual neighbours. The
country has larger and considerate premium assets or insurance assets
while equally enjoyed in its jurisdiction are the many insurance and
reinsurance companies. Cross-border transfers are easier for
insurance premiums, with no tax charged on such transfers for ULIP.
Besides, Luxembourg is a strong regulator with its tripartite
agreement between the Bank, Insurance Company and the Superior
Authority. Hence, Luxembourg is identified as the best candidate.
Journal of Insurance and Financial Management
*Corresponding Author:
Andreas.svoboda@ffhs.ch
Author(s) retain copyright of the submitted paper (Please view the Copyright Notice of JIFM).
This work is licensed under a Creative Commons Attribution 4.0 International License.
Journal of Insurance and Financial Management (ISSN-Canada: 2371-2112)

24 Svoboda A. / Journal of Insurance and Financial Management, Vol. 5, Issue 2 (2022) 23-73
1.0 Introduction
Insurance sector as an investment path remains one of the most admired and pursued business
opportunities (Eling & Jia, 2018). It holds an exceptional relevance in history, and has been
around for many centuries (Gaganis et. al., 2019). One of the reasons for choosing this path for
business venture is that it ranks among the few recession-proof industries. Therefore, individual
entrepreneurs or businesses are driven by the nature of the industry of remaining stable and
sustainable as a promising endeavour (Kaffash et. al., 2020), a prolific investment are for
protecting each nation’s valuable assets (Nicholson, 2019). Many willing and emerging
entrepreneurs would love to establish a company in a lucrative economy, especially regions
like the European market with the best regulatory instruments, tools, and environment for
safeguarding such investments.
The particular focus of this report is Unit Linked Insurance Plan (ULIP) as investments made
by considering the risks associated with capital markets (Ostrowska-Dankiewicz, 2017).
However, the asset risk in this security assortment is carried by the policy holder (Gupta, 2012).
Furthermore, the investment decisions are made by considering the future needs for funds
(Yuldashev, 2020). In so doing, insurance providers always focus on providing a variety of
unit-linked insurance products suitable for the investment goals, whether for health, retirement
plan, marriage, children’s education, or even investment purposes (Singh et. al., 2018). ULIP
is a broader or extensive product combining assurance cover and associated asset exposure
within a lone subscription (Dacev, 2017; Nagarajan et. al., 2013; Bosserhoff & Stadje, 2021).
ULIP can be used in different benefit pay-outs like education expenses, retirement income, and
life insurance (Vojinović et. al., 2018). Mostly, investors open ULIP for offering these
categories of coverage for their beneficiaries (Van der Heide, 2020). Therefore, with a contract
containing ULIP life insurance, a benefactor receives payments following the policy holder’s
death (Alhakim & Yohanes, 2017; Luca, 2018). The policy holder can commit the entirety of
Svoboda A. / Journal of Insurance and Financial Management, Vol. 5, Issue 2 (2022) 23-73 25
his or her payment lump sum when purchasing the ULIP for the first time, then followed by
other arrangements like premium, semi-annual, monthly or annual remittances (Siregar et. al.,
2019; Nagarajan et. al., 2013). Yet, the uniqueness of ULIP is that they ensure elasticity to
investors who may possibly be fine-tuning their stock prediction in the entire investment
period. For example: when relying on the venture needs, investors can move between bond
funds, stock and diversified reserves (Bosserhoff & Stadje, 2019).
ULIP is suitable for those who have the need for closely tracking their investments, as they
also offer the flexibility of switching the investor’s capital between funds with varying risk-
return profiles (Poufinas & Michaelide, 2018). It is also suitable to those individuals with
medium to long-term investment horizon, ideal for those who are ready to stay invested for a
relatively longer period of time (Ostrowska-Dankiewicz, 2015). Equally, this is considered by
those individuals with varying risk profiles, because equity component varies from zero to a
maximum 100 per cent (Halder, 2020). In so doing, choices of funds are available for a variety
of investors or different types of investors, implying that they are applicable for investors across
different life stages.
1.1 Purpose and Objective
Given the opportunity presented in the insurance sector, the focus of this article is to evaluate,
assess, and identify the best place in Europe for an insurance company to be established.
Moreover, in this kind of environment, the premium payment is mainly once off and not
regular. The main aim of this investment (setting up the company) is to profit from tax deferral
in Europe. Therefore, the policy needs to be held in most countries until the holder reaches the
retirement age. With this, the policyholder can not only participate in the investment gains and
certain death coverage, but also benefit from deciding the inheritance clause according to local
legislation as some of the countries might have forced heirship rules. In addition, the heirs or
beneficiaries of such an insurance policy might have tax benefits when receiving the money
upon the death of the insured person. Tax benefits include the deferrals and exemptions.
This analysis is focuses on the general economic condition in the country, including ease of
doing business, professionals available, languages spoken (whether language barrier exists),
social cohesion, work and life balance. Yet, of importance is evaluating the professional
qualifications of the country’s insurance professionals, and using the information to analyse
both qualitative and quantitative data of Luxembourg, Ireland and Liechtenstein’s insurance
sectors.
To address this issue, a country-comparison task pitting Luxembourg against Liechtenstein and
Ireland has been conducted. It compares the major pros and cons upon various topics, such as,
professionals available, languages spoken, regulatory, DTTs, and EU or European Economic
Area (EEA) passporting. This extensive analysis contributes to explaining whether and why
Luxembourg is the ideal place to set up an insurance company in Europe, or Ireland and
Liechtenstein are better suited as the best destination for establishing an insurance company
offering Unit-linked life insurance plans (ULIPs).
The ULIP are not retail life insurance; hence no regular premium payment and normally will
not be pooled (van der Heide, 2020). Therefore, the policyholder can decide the investments
according to the regulation in this country (Luca, 2018). Each policy will have a separate
account with the bank; hence, it is very easy to allocate the client’s asset. Meanwhile, of
consideration is the triangle of security which Luxembourg makes good advertisement with
(Alhakim & Yohanes, 2017). That is to say, in case of bankruptcy of the insurance company,
these policy assets are segregated and therefore do not fall into the bankrupt’s estate.
2.0 Materials and Methods
This exploratory study was based mainly on secondary data by reviewing documented reports,
country surveys, and analyses. The document analysis focuses on the general insurance (life
insurance) trends in Europe, including opportunities and challenges, prospects for investing the
particular market, and narrows down to Luxembourg. The analysis of documents (secondary
methodology) provides insight into the ULIP trends or general market in Europe and
Luxembourg, comparing the country to alternatives like Ireland and Liechtenstein.
3.0 Findings
3.2.0 Trends in the European Market
3.2.1 Europe’s General Insurance Market Trends: Opportunities and Challenges
First of all, the European life insurance industry experiences different challenges and emerging
opportunities owing to the changing demographic and technological trends (the emergence and
introduction of new technologies) (Borda et. al., 2020; Iqbal et al., 2017).
Firstly, there is the emergence of new technologies being used in claims and under-writing
management processes with transforms on the business practices targeted at life insurance
(Barbara et. al., 2017). Procuring a life cover product has become quicker and convenient than
ever imagined (Borda et al., 2020). Yet, with the new technologies leading to life insurance
sector digitalisation, new challenges and concerns have emerged owing to the need for new
approaches for managing risks and calculating premiums (Bohnert et. al., 2019).
The second identified trend is the demographic changes across Europe, especially the ageing
population. Health status of the populations has improved owing to the progresses in diagnostic
and medical technologies (Borda et. al., 2020). Moreover, the transition into healthy lifestyles
and educational structure has increased the populations’ social awareness on health issues
(Arshad & Yusuf, 2021). All these changes prolong the life expectancy and have resulted in
more people living longer (Mitra, 2017). Yet, a lengthier lifespan expectation implies longer
retirement age to which the retired person’s financial needs equally increase, leading to the
amplified healthcare demands for the elderly (Borda et, al., 2020). This presents opportunity
for insurance firms as they can offer innovative health and life insurance products for
complementing social insurance and pension systems to manage this increasing longevity risk.
Third, gross written premiums for life insurance have been rising. Recently, the region reported
5.7% in Gross Written Premiums (GWPs) for life insurance, further defined by the insurance
having profit participation of around 3.8% as well as a 17.9% upsurge or growth increment in
other life insurance (EIOPA, 2019).
The fourth trend is the EEA return ratio targeting assets held in unit-linked and index-linked
assets plummeting from 8% in the year 2017 to a concerning low of -5% in 2018 (EIOPA,
2019). Yet, the concern was the significant differences in the insurance undertakings.
Furthermore, the returns were specifically reported to have been affected by costs.
The fifth trend is the growing insurance commissions in the European market. For instance, the
latest report has specified that from the 176 insurance undertaking experiencing the 5% growth
rate in 2018, around 122 of them had beyond or above the EEA weighted average of around
2.3% with another 64 having their rates of commissions beyond the non-weighted average of
the Member States amounting to 6.6% (EIOPA, 2019).
In summary, these trends across the European market points to the growing insurance market
with both life and non-life insurance reporting increasing penetration rates throughout the EEA.
Despite this outstanding growth, there are issues with complex unit-linked contracts that
continue to be a challenge for the national competent authorities (NCAs) (EIOPA, 2019). The
major issues are reported with these types of insurance premium covers, including limited
customer’s comprehension of the products, lack of transparency, conflict of interests, product
complexity, and inadequate returns, along with the overall increased selling of the unit-linked
policies to vulnerable customers or subscribers (Grima, 2020).
In Europe, there has been much focus on strengthening consumer protection, triggered by the
increasing market risks (Giantsios & Noulas, 2020). Investing in the European’s insurance
market or industry calls for focusing and understanding the associated market risks, especially
overregulation of the market along with the opportunities for innovating services and products
(Borda et. al., 2020). The focus should be on highlighting the necessary conditions or
opportunities for digitalization of the services including new categories of risks (Grima, 2020).
Yet, with new technologies, consumer protection and regulations, there are opportunities for
success in the European market.
A major challenge across Europe is that irrespective of improved practices in disclosure, which
is an insight from the customers, there have been noteworthy issues with product review and
product design processes (Relan, 2020). The area is set to attract new and major changes,
especially when the new Product Oversight and Governance (POG) necessities are set to be
implemented (Borda et. al., 2020). This, in essence, is a new regulatory requirement whereby
product manufacturers are being compelled or driven into accounting and considering
customer’s needs throughout the lifecycle of their products.
The European insurance has seen an emerging abuse and misselling insurance products. This
implies the need and search for various approaches for supervising and regulating the industry
(Borda et. al., 2020). It also means the need to focus on exploring and responding to these
systematic connections including the increasing numbers of regulatory incentives (Pradhan et.
al., 2020). All these have profound implications for insurance companies in Europe, further
exacerbated by compliance risks. Furthermore, the market reports an increasing prevalence of
conduct issues associated with credit life or credit protection and unit-link insurance besides
add-on insurance products. Other notable trends in the region include the remaining concern
for claims management for the motor insurance covers (Borda et. al., 2020).
In summary, the general identified trends in the European market include: three major industry
trends of demographic and technological changes. Yet, for life insurance, the gross written
premium for life insurance have been rising but EEA return ratio for the assets held in index-
linked and unity-liked assets have plummeted over the years, but life insurance commissions
have risen or increased over the past.
3.2.2 Europe’s Life Insurance Sector
The market trend of the life insurance sector for the EEA has reported a growth. Yet, the unit-
linked and index-linked insurance continue to be representing the largest business line.
National Competent Authority (NCA) has been concerned about the complex unit-linked
contracts (EIOPA, 2019). When setting up an insurance company in Europe, some of major
areas include improper consumer understanding, lack of transparency, and the complexity of
the products (Flyverbom, 2017; Ostrowska-Dankiewicz, 2019). The new company or firm will
equally have to confront issues and challenges with conflicts of interests, product information,
management of claims, digitalization issues and concerns, customer segmentation, cross-
selling, financial education, advise provision, and product governance and administration
(EIOPA, 2019).
3.2.3 Unit-Linked Insurance Plans in Europe
The European market in general, report uniform patterns in ULIP covers, especially available
technical knowledge and expertise, good communications and relationships, efficient and fast
partner services (Dacev, 2017; Ostrowska-Dankiewicz, 2020). The market is generally defined
with the ability of managing complex cases, accuracy of customer reports, offering services
through digital channels, speedy operation procession, customer policy information easy
access, and customized customer reports user-friendly and quality client extranets (Vojinović
et al., 2018; Grishchenko, 2020).
Lombard International Group, (2021) carried out a wealth survey on ULIP and noted the
growing wealth assurance market, need for awareness and education on wealth assurance,
multi-faceted decision-making criteria as well as digitalisation imperative. The report noted
that around 30% of wealth professionals confirmed to over half of their clients using unit-linked
life insurance, with 57% of the respondents agreeing that these types of insurance covers are
good, recommending to clients when necessary and possible. The report also outlined a specific
issue with succession planning, the top motivating factor across wealth professionals for
recommending the ULIP.
However, the report identified and noted concerns with the need for education and awareness
on wealth assurance benefits. For instance, 26% of those interviewed noted how discretionary
managed accounts are the common ULIP alternative in wealth planning (Lombard International
Group, 2021). Secondly, the perceived set-up price was identified as the single most barriers
to choosing ULIP. Finally, from family officers, they admitted that the lack of knowledge and
complexity of the solutions, a part from costs, were second barriers to ULIP usage.
The report also outlines the criteria that clients use in decision-making. For one, customers will
focus on quality of service as the most important criterion when identifying the most preferred
provider (Lombard International Group, 2021). Secondly, there is a need for digitalisation of
the services. There is the inherent need for improving digital services in the industry generally,
as the satisfactory score is only 2.89 out of a possible 5, as 1 is considered the highest score by
the wealth professionals (Lombard International Group, 2021). Besides, 75% of the wealth
professionals are expecting a very high digitalisation level in the coming year. Furthermore,
customer service technology is on demand including mobile technologies and cyber security
issues. These are some of the tech-enabled imperatives for ULIP offerings in the European
market.
Yet, the third issue is the complexity of the cases ranking among the most vital decision-making
issues. The advisers currently using ULIP noted that the chosen providers must prioritise the
advancement of the capabilities to manage complex cases. This includes provide detailed
insight into fees charged and offering the necessary support to the clients to adapt the speedily
changing or evolving regulatory environment.
Finally, the Lombard International Group report noted that the ULIP sector is expected to rise
in response to the opportunities and challenges presented by modern life. Particularly, the group
noted customer experience, market conditions, and regulations as the biggest challenges
confronting wealth professionals. Secondly, the report noted that around 70% of insurance
brokers have predicted an increment in ULIP usage in the next five years (Lombard
International Group, 2021). Key drivers of the industry include regulatory, tax and compliance
responsibilities as the primary motivators for choosing ULIP solutions in the near future.
In summary, the European market reports uniform patterns in ULIP covers but there is still
concerns over the need for education and awareness on associated benefits with wealth
assurance. The second trend issue is the need for digitalisation of services. Finally, there are
concerns over the complexity in the decision-making criteria for insurance covers. Despite
these challenges, the ULIP is expected to grow, owing to the owing the opportunities and
challenges of modern life that create the need for life insurance covers.
3.3.0 Overview of Luxembourg
3.3.1 General Overview of Luxembourg
Luxembourg is a nation that has ever incorporated the knowledge of its citizens and equally
the cross-border travellers along with immigrations from other parts of the world. The country
has leveraged their contribution and input towards its growth and development (Zhelyazkova
et. al., 2018). Luxembourg is multi-cultural with 70% of the workforce comprising
immigrations or better still, cross-border workers (Le Gourverment du Grand-duche de
Luxembourg, 2021). It enjoys around 200,000 cross-border commuters from France, Belgium,
and Germany working in the country. This implies a ready market for regional expatriates if
an insurance company established in the country. Particularly, France represents around 50%
of the country’s workforce, providing the largest contingent, followed by Belgium at 25% as
Germans constitute the last 25%. This means that 45% of foreign expatriates in Luxembourg
are cross-border domestic workers. Therefore, the country enjoys a readily available cross-
border or regional workforce that speaks major languages of Luxembourg, understands the
market, and equally has the necessary expertise for the insurance profession. The cross-border
workforce is complemented by the 10,000 international civil servants and officials (Le
Gourverment du Grand-duche de Luxembourg, 2021).
Any insurance company established in this country will benefit from its highly qualified
workforce. For instance, the World Economic Forum’s 2015 report had placed Luxembourg at
the highest ranking due to the large skilled labour or workforce in the surveyed active
population (Le Gourverment du Grand-duche de Luxembourg, 2021). This also adds to the
ease of communicating, as there are French, Luxembourgish and German speakers but English
is equally widely spoken. Furthermore, it means that problems with language barrier may not
hinder a professional from working in the Luxembourg.
Luxembourg equally boasts of multilingual and international working environment. The
country has developed in main sectors including e-commerce, information, and communication
technology, and biotechnology while similarly encourages research and development
incentives or measures. The labour and economic attractiveness explains why Luxembourg
hosts several international industrial groups including Guardian, Dupont, Goodyear, and
ArcelorMittal. Yet, country is a financial centre playing a key role at the international level
with many European financial institutions located in the Luxembourg capital.
Economic conditions also make Luxembourg a better investment destination. For instance, the
unemployment rate in the country is below the European average, standing at 5.5% (Le
Gourverment du Grand-duche de Luxembourg, 2021). The country’s National Employment
Agency has been tasked with the responsibility of helping and linking jobseekers with the most
appropriate employment opportunities, along with helping employers to locate suitable staffs
that resonate with their business.
As the target country and focus for establishing the insurance company, Luxembourg could be
a choice where there is an excellent work-life balance with sporting and leisure activities. The
country boasts of scenic landscapes that allows cycling, hiking, and enjoyment of outdoor
activities possible. Hence, there are a myriad of opportunities for unwinding (Le Gourverment
du Grand-duche de Luxembourg, 2021). This is also the best place for foreigners to enjoy
sightseeing and nightlife, especially the Philharmonie concert renowned for international
performances. The small geographical scope similarly makes commuting around the country
easier, a country measuring 57 kilometres wide and 82 kilometres long. Any place in
Luxembourg is accessible by train, tram, bus, and car (Le Gourverment du Grand-duche de
Luxembourg, 2021). This is also considerably the best place for raising children and a foreigner
will not have a problem tagging his or her family along the work expedition. Furthermore, there
are day-care facilities and international schools network. It provides the opportunity for
children to learn more languages and this means the opportunity for developing a unique and
true international setting.
In summary, Luxembourg as a country exploits the knowledge and expertise of both citizens
and cross-borders in addition to immigrants worldwide. The country is multicultural and enjoys
a portfolio of multi-talented and skilled workforce from within, regionally and internationally.
Besides, the country has one of the lowest unemployment rates, below the European average.
Quality of life is also high with proper work-life balance, enabled through leisure and sporting
activities.
3.3.2 Professionals Available
Luxembourg enjoys a powerful economy that produces a constant movement of dissimilar,
safe, in addition to lucrative employment openings that can give an individual the job prospects
(Le Gourverment du Grand-duche de Luxembourg, 2021). The country is similarly a vivacious
commercial hub and pays homage to a number of European establishments, relying on
extremely experienced aptitudes for fuelling the circular, data-driven, and viable economy. The
key business sectors provide a ready market for insurance companies including automotive,
life science, space technologies, logistics, and Fintech, clean technologies along with being
tremendously linked and reliant on best-in-class ICT expansions (Le Gourverment du Grand-
duche de Luxembourg, 2021). The country similarly enjoys a booming construction sector,
along with the extensively developed or advanced service sector. These opportunities and
aspects of economic growth and development explain why Luxembourg has been a target
destination for companies, corporations, and employees alike. The size of the country has been
attracting different talents worldwide, apparently ranked second with regards to talent
attraction globally along with the world leading in highly skilled employment (Le Gourverment
du Grand-duche de Luxembourg, 2021).
The availability of cross-border professionals is motivated by the stable and potent economy
producing an incessant influx of assorted, confident, as well as well-paying employment
openings (Le Gourverment du Grand-duche de Luxembourg, 2021). Luxembourg has been
recording a stably growing economy, documenting higher than the EU average economy
performance, posting an employment increment of over 50% in the last 15 years, enjoying one
of the world’s highest GDP per capita (Le Gourverment du Grand-duche de Luxembourg,
2021). This is reportedly one of the world’s safety places, with strong social cohesion,
favourable tax regime, and first-rate healthcare system suitable for highly skilled workforce.
The jobs in this country are covered under permanent contract; hence greater enjoy job security.
The quality of life in Luxembourg also makes the country the perfect destination for foreign
workers because it supports both sporting and leisure (Le Gourverment du Grand-duche de
Luxembourg, 2021). For instance, individuals have the choice and fun of enjoying outdoors,
cycling, hiking and every opportunity, especially weekends, is for unwinding. The country’s
Philharmonie concert provides opportunity for foreigners to engage with various international
artists and performers (Le Gourverment du Grand-duche de Luxembourg, 2021). The concert
correspondingly attracts a larger international artist base, especially bands. As mentioned
above, the relatively small size of the country makes it accessible conveniently for
professionals crossing over the neighbouring countries. Foreigners and expatriates would wish
moving with families to Luxembourg, as it provides favourable conditions for their own career
and their next generation (Le Gourverment du Grand-duche de Luxembourg, 2021).
Overall, Luxembourg has a powerful economy with able professionals attracted by the size of
the country and employment opportunities. There is a readily available cross-border
professional workforce and the country attracts a large number of global professionals (skilled
and experienced workforce from other parts of the world).
3.4.0 Country Comparisons: Luxembourg, Ireland, and Liechtenstein
3.4.1 Insurance Companies
With regards to the total number of the present insurance companies and reinsurance firms,
Luxemburg surpasses Ireland. For instance, by July 2018, Luxembourg had around 300
insurance companies, compared to 130 insurance companies in Ireland as of 2017
(Pourplanche, n.d). Besides, Luxembourg’s 52 companies offer life insurance and employees
around 2400 employees. This is higher than Ireland’s 32 companies offering international life
insurance (Pourplanche, n.d). Hence, in terms of the number of insurance companies,
Luxembourg is superior to Ireland and could be considered as a country with more
opportunities for establishing or building an insurance company.
In comparison, Liechtenstein only has 36 insurance companies, mainly in life insurance.
Reportedly, life insurers are enjoying a considerably strong retail business besides, innovate
risk insurance for private clients with high-net worth (Zgraggen, 2019). In Liechtenstein,
insurers are profiting from direct insurance treaty that the country has with Switzerland with
the opportunity of distributing insurance solutions from Liechtenstein and equally harness
these with the relevant laws in the specific target markets (Heiss, 2017). There are flexible,
innovative and Europe-compliant insurance solutions harmonised with the tax and legal
statutory provisions of each target market have been the reason behind the growth and success
of Liechtenstein’s insurance market (Kraus et al., 2017). Besides, the Liechtenstein Insurance
Association, founded in 1999, is the umbrella organisation representing the different interests
of member companies at international and national levels (International Association of
Universities (IAU), 2019). Its objective, through a 33-member team, is for developing and
expanding Liechtenstein’s insurance centre.
In summary, Luxembourg has more insurance companies than Ireland and Liechtenstein
offering life insurance covers. This is an indication of a thriving sector and prospects for
success for any new establishment.
3.4.2 Assets under Management
Luxembourg enjoys a substantive amount and value of assets managed, with over 4.20 trillion
pounds being managed (Pourplanche, n.d). However, these are spread in over 70 centres in the
country, and two thirds are internationally distributed. In comparison, Ireland has 4.82 trillion
pounds of assets under management (Pourplanche, n.d). Although this value and volume is
larger than Luxembourg’s, the former enjoys a better position in insurance cover or
management with international distribution of its assets. In comparison, Liechtenstein’s asset
value for insurance companies was CHF 31 billion as of 2020 (Liechtenstein Finance, 2021).
Ireland has a larger asset value under management, although Luxembourg slightly higher than
Luxembourg’s 4.20 trillion pounds of assets as reported by Life Insurance 360 website
(Pourplanche, n.d)
3.4.3 New Business opportunities
The third perspective for comparing the countries is the new businesses that have been opened
in the recent years, evaluated based on company headquarter distributions within each country.
Luxembourg enjoyed major developments in 2018, with +2.9% new business opportunities or
openings regarding premiums (Pourplanche, n.d). This value amounted to between €22.50 and
€25.00 trillion in premium investments, including around €20.00 billion in terms of Full
Payment Submission (FPS) premiums.
Table 1: Units of Account Breakdown (average premium and share)
Source: (Pourplanche, n.d).
From Table 1, Luxembourg has been experiencing an overall decrease in its bonds in the past
or recent years, especially less than 5% in public sector ponds. Yet, the country still has a bigger
normal first-class 38,784,331 million as per written payments, from which life insurance
amounts to 23,840,743 (Pourplanche, n.d). This is lower than Ireland whose average total
written premiums were 15,410.3 billion, with 11, 841 billion written as life insurance
(Pourplanche, n.d). As such, Luxembourg’s average premiums as measured in terms of units
of account are lower and experiencing a downward spiral as compared to Ireland. No data exists
for Liechtenstein. In summary, Ireland’s new business opportunities for financial services are
slightly higher than Luxembourg, with no data for Liechtenstein.

3.4.4 Security (Regulations)
In summary, all the countries have sound regulatory framework for the insurance sector. Yet,
Liechtenstein is not part of EU, although insurers can access it through Swiss laws to which
the country is part of Switzerland’s agreements on insurance laws. Particularly, Luxembourg
has the best regulatory framework, the triangle as a security triangle requiring each assurance
corporation to credit the technical assets of the policies with self-governing curator banks
thereby providing the necessary protection to the investors. This means stronger regulatory
protection for the insurance providers in the country.
As regards to the existing regulations to protect and provide insurance security, Luxemburg
outperforms Ireland. Luxembourg has a security triangle requiring each assurance corporation
to credit the technical assets of the policies with self-governing curator banks thereby providing
the necessary protection to the investors. This includes the tripartite agreement signed or
entered between the Bank, Insurance Company and the Superior Authority (the Commissariat
Aux Assurances). The regulatory requirement exists in Ireland under Article 9 of the Irish Law
(Pourplanche, n.d). This obligates or compels any Irish insurance firm with the similar
compulsion for depositing the technical capitals of the policies with self-regulating guardian
banks all for protecting the investors.
Furthermore, it is also interesting to compare these two from the perspective of super privilege
regulatory requirement or arrangement. In Luxembourg for instance, there is the law
compelling subscribers and policyholders as leading creditors when the corporation has been
confirmed insolvent. Hence, in an instance of the business’s isolated assets are not enough for
reimbursing policyholders or the subscribers, then the latter enjoys preferential right over other
assets. Yet, the country’s regulatory requirement or arrangement places some exceptions to the
privilege. The same applies in Ireland. Therefore, the two countries have the same super
privilege security or regulation. Yet, the only privilege and advantage that insurers have in
Luxembourg is that the country has established multi-currency life cover plans. Under such
arrangements, non-nationals are presented with the advantage of avoiding foreign exchange
risks.
Ireland and Luxembourg also compares to Lietchestein in terms of regulation, bringing
supervision laws for insurance to align with the expected European standards. As an EEA
member, any insurance company in the country can freely access the EEA (Naegele, 2008).
This means the business activities being subjected to EU-conformity insurance supervision.
There is also the agreement between the Principality of Liechtenstein on direct insurance
coming into force in January. The agreement allows Swiss and Liechtenstein insurance firms
to operate as direct insurers in each country, or in the respect other country. The regulatory
arrangement is an opportunity and advantage for non-domestic insurance companies in
accessing the Swiss market along with the EEA market through establishing subsidiaries in
Liechtenstein. The regulatory framework allows for offering insurance products or services on
a free market instead of using subsidiaries.
3.4. 5 Luxembourg vs. Ireland
Luxembourg and Ireland are best compared by looking at their financial hub capacities within
the international trading platform. Table outlines this comparison in terms of value of
premiums the two countries have in different markets and cross-border insurance opportunities
or investments.
Table 2: Financial Hub Capacity (The International trading platform) (Pourplanche, n.d)
Comparison Luxembourg Ireland

criteria
Value of • French market: : €8, 085, 048, 299 Italian market: €14,418,508
premiums
• Nordic markets : €594,175, 497 €
• Spanish market: €475,982, 124. 57 Spanish market: €102,790
• Remaining EEA markets : €9, 979, German market: €141,220

88, 434
• German market : €1, 594, 825, 179 Remaining EEA markets : €254,79
• Italian market : €6,120, 291, 847 UK market: €2,161,244
• Belgian market : €1, 689, 595, 741.17 Non-EEA market : €136,769
• Portuguese market : €558, 182, 159,4
• Markets outside the EEA :

€7.402.623
Banking Services • The country has around 140 Ireland only has 58 banks
international banks offering various operating in the country
service including treasury, asset
reengineering, custody and funds and
banking services
• As regards passporting, it takes
European passport
Cross-border • Luxembourg is European’s hub or In comparison, Ireland has a

insurance centre for providing cross-border strategic international or
insurance and the country equally worldwide location
enjoys committed insurance regulator
• The country equally enjoys strategic
worldwide location and better than
other nations or countries with its
world class connectivity
Source: (Pourplanche, n.d)
Table 2 shows Luxembourg’s stronger international value premiums, with 8 billion premiums
in French Market, €475 million in the Spanish market compared to Ireland’s 102,790 in the
same country. For instance, Luxembourg has invested €1, 5594, 825, 179 compared to Ireland’s
€141,220 value premiums in the same market. Therefore, when compared with international
investment, Luxembourg enjoys greater value premiums than Ireland. Furthermore, the country
has€ 7,402,623 in value premiums beyond the EEA region unlike Ireland that does not have
such an investment. Luxembourg also has a strong banking sector, with 140 international banks
compared to 58 international banks in the country. Both countries are strategic international
business or investment locations. However, Luxembourg takes an upper hand as the European
financial hub providing cross-border insurance cover and equally strong or robust insurance
regulation. Hence, in terms of international financial trading platform, Luxembourg is superior.
3.4.6 Luxembourg vs. Liechtenstein
Liechtenstein is the second country of comparison in Europe. The country holds the history as
one of the nations that faced the devastating impacts of the world wars. However, one of the
main drivers of economic development in the country has been the low tax regimes spurring
the nation’s unique and outstanding economic growth. Other insights of consideration in this
country is the 2000 limitations and weaknesses in the banking regulatory oversight triggering
concerns over the loopholes of using the country’s financial institutions for laundering money.
Yet, through its anti-money laundering legislation as well as the Mutual Legal Assistance
Treaty effected between the country and the USA, the protection of financial institutions and
services has been improved in the state.
Liechtenstein, similar to Luxembourg, also has a highly and properly regulated insurance sector
or market under the Insurance Act of 2001. However, as the country has adopted part of the
Australian laws and obligations, the European and Austrian jurisdiction along with the
appropriate documentation must be reflected or considered when assessing and evaluating the
insurance contracts. A company being set up in Liechtenstein must also adhere to the
established laws by the country’s Financial Market Authority (FMA) before entering into any
insurance contract. The FMA is tasked with the mandate of supervising insurance
intermediaries in the country and as such, guarantees the necessary or proper supervision for
the insurance cross-border activities. Other regulations include the Insurance Supervision Act
of 2015 as considerably relevant or of consideration when writing insurance contracts in the
country.
Table 3: Liechtenstein vs. Luxembourg (Quality of Life)
Liechtenstein Luxembourg
GDP 139,100 105,100
(per capita, in
Euro)
Unemployment 2.4% 5.8%
Rate
Top Tax rate 24.% 43.6%
Education 2.6% 3.9%
(in % of GDP)
Source: MyLifeElsewhere (2020)
As exhibited above in Table 3, compared to Luxemburg, Liechtenstein has a higher GDP per
capita – roughly 32.4% more GDP per capita. The unemployment rate is also much lower in
Liechtenstein – a normal employee in Liechtenstein has 58.6% less likelihood of becoming
unemployed, compared to that in Luxembourg. In respect of top tax rate, Liechtenstein
outperforms Luxembourg as well. As shown in Table 3 43.6% top tax rate Luxembourg, 24%
in Liechtenstein. It implies that an ordinary tax payer has 45% lower opportunity for paying
top tax rate in Liechtenstein as compared when he/she in Luxembourg. This provides a rather
favourable condition. However, Luxembourg invests more on education. 3.9% of the GDP is
spent on education, while Liechtenstein only 2.6%. It implies that Liechtenstein has 33.3% less
expenditure on education in comparison to Luxembourg.
The country’s insurance sector is equally highly regulated as that in Luxembourg. For instance,
Article 2 VersAG subjects companies into extensive insurance supervision, a provision that
equally applies or covers the reinsurance companies (MyLifeElsewhere, 2020).
There are also arrangements and considerations for foreign ownership. For instance, FMA must
be informed prior to writing undertaken or considered by the interest groups concerning the
intended sale or purchase of qualifying participations, which is around 10% set minimum in an
insurance company, whether indirect or direct (MyLifeElsewhere, 2020). Furthermore, every
intention to increase or sell qualifying participation have to be reported in writing when it
exceeds 50% share capital or voting rights of such a typology or insurance undertaking. The
foreign interested seller or purchaser not residing in Liechtenstein but with qualifying
participations, whether indirectly or directly, must make announcement about the delivery
address of the domicile. Moreover, FMA compels the need for providing ancillary information
when the interested individual purchase is operating as the legal entity from a third county,
especially foreign financial authority statement and clearance certification (MyLifeElsewhere,
2020). Liechtenstein is also considered a market with higher market access barriers owing to
the stringent regulatory requirements.
As opposed to Luxembourg, Liechtenstein charges tax on particular insurance premiums. For
instance, there is a 5% rate charged on cash premium, targeting 2.5% for life insurance (PwC,
2021). There is also no flexibility in currency transactions like in Luxembourg as the cash
premium held in foreign current must be converted into Swiss francs when the tax claims arise.
Also considerate are the number of insurance companies in the market. A data analysis or
survey between 2011 and 2019 confirmed that there has been a decline in the market, with 37
companies operating as of 2019, both domestic and the total insurance market participation or
engagement in Liechtenstein (Statista, 2021). In country, the insurance premiums targeted for
policies held by the domestic portfolio being supervised and insurers are subjected to insurance
premiums tax. Furthermore, premium remittances for policies that are concluded by any
domestic policy holder with foreign non-supervised insurer also have to be subjected to the tax.
In summary, the striking point of comparison is GDP. Liechtenstein has a bigger GDP, all
attributed to its small population and size. Yet, Luxembourg has a considerably bigger GDP
with a larger percentage spent on education (to ensure professional and development).
3. 5. 0 Setting up a Business (Registering a Company)
The three countries can be compared on the basis of setting up a business, including the process
of registering a company and necessary requirements obligated for companies. This
comparison considers the advantages and disadvantages of registering a company in each
country.
3. 5. 1 Ireland’s Advantages
By registering a company in Ireland, the business has an opportunity to join the European
Economic Area (EEA). Ireland also uses Euro as a currency and the only English speaking EU
member after Brexit (Healy Consultants, 2021c). This also provides the strategic access to the
UK as the countries are sharing the same border. Irish employees can equally move through
and easily across the EU block where they can work and live.
Ireland enjoys law tax, with a 12.5% corporation tax rate, EEA’s third lowest after Hungary
and Bulgaria. Besides, outgoing overseas funds transfers enjoy the ease of legally eliminating
withholding tax, with annual corporation bill apparently reduced to 25% (Healy Consultants,
2021c). In the country, no withhold taxes are charged on a company established in Ireland for
the outbound payments for a maximum of 73 double taxation signatory countries. Furthermore,
the Irish Tax Authorities allow both phone and email communications, they are helpful,
providing clear information on tax rules as well as any clarification as regards tax laws.
Multinational Corporations operating in Ireland with subsidiaries have numerous benefits not
limited to 0% corporate tax rate (Healy Consultants, 2021c). When properly structured, a
company will enjoy tax-exemption from subsidiary dividends, foreign branch profits, royalty,
interest, and patent income. In the country, there are greater benefits including consolidated tax
returns filing exemption, along with the inter-company transfer of trading excesses
management expenses, losses and capital allowances. Any large Irish company or firm that has
been registered as non-resident enjoys benefits from the absence of ‘Thin Capitalization rules’.
Furthermore, a newly established company in the country is entitled to a grant of 10,000 euros
as a grant for each hired staff member from the long-term unemployed pool (Healy Consultants,
2021c). The employees also receive re-skilling courses and free re-training.
There are major benefits directed at foreign employees who are moving to Ireland for setting
up businesses, enjoy the low tax incentive, especially the 30% of more than 75, 000 euros salary
will be exempted from income tax (Healy Consultants, 2021c). Other advantages include the
no benefit-in-kind tax on employee accommodation, stock options, annual school fees,
employee flights back home, and subsistence costs. Foreign employees are also assigned to the
Special Assistance Relief Program (SARP), providing them with income tax relief.
Setting up a company in Ireland, especially a multinational and foreign company provides
benefits with the accessibility with the larger number of quality labour assistance as hourly
labour cost is 30.5 euros, among the lowest in EU employers not legally mandated to provide
pensions for their employees, including other benefits like health care. Ireland equally enjoys
the third labour productivity in the EU (Healy Consultants, 2021c). This country also enjoys
the youngest population base, with around 55% of the Irish under 35 years of age, showing
excellent aptitude for interpretation, efficient collection and research information
dissemination. Besides, one million Irish are under full-time education, and around 48% of the
25-34 age back are reportedly third level qualified. Besides, over 520,000 of the Irish citizens
are multilingual, including French, Polish, Russian, German, Romanian, and Spanish (Healy
Consultants, 2021). Besides Swiss and EEA nations do not need a work permit or any visa
application to work in Ireland.
Finally, Ireland enjoys the position of being a technology hub, qualifying for knowledge
development box compliance by the OECD (Healy Consultants, 2021c). The country boasts of
a highly talented and skilled workforce in technology, science, and engineering. This level of
development has rendered the country the largest software developer. Besides, there is a
considerate support from the government through the Business & Technology Parks portfolio’s
strategic locations.
Therefore, registering a company in Ireland presents numerous benefits and advantages as part
of EEA, a strong current (Euro), strategic location for cross-border business, law tax,
government grants for new companies, foreign employee exemption from income tax, highly
skilled and professional multilingual labour force and a technology hub.

3.5. 2 Disadvantages of Ireland
Before setting up a company in Ireland, care should be taken to assess whether the company
will be subjected to Irish VAT for imported services and goods which goes up to a maximum
of 23%. There is also the 25% corporation tax to be charged on a limited company on annual
net profits for any passive income in local rents, or local investment income (Healy
Consultants, 2021c). Professionals or small tax residents in the country are equally exposed to
a 20% surcharge on rental income and undistributed investment. Accordingly, professional
services corporations will pay a 7.5% surcharge for their undistributed trading income. Any
Irish company as well as subsidiary firms are obligated by the regulator to submit their annual
financial statements to be reviewed and evaluated by an independent statutory audit
irrespective of their income levels. Before setting up a company in the country, company
secretary and resident director must be recruited, with a 25,000 (in euros) bond deposit with
the Irish Business Registrar.
Ireland’s work environment is defined by a complicated employer-employee relationship as
there is an 11.05% PSRI mandatory contribution by government employee (Healy Consultants,
2021c). Besides, the country has one of the strongest and powerful industrial unionization. The
employee is also obligated to compensate employees dismissed for redundancy. Employees
compel a mandatory attendance of the Employment Appeals Tribunals on unfair dismissals.
Besides income tax there is the unpopular punitive Universal Social Charge, reaching up to 8%
of their gross salary. Employees are also entitled to a maximum 48 hour average, including
overtime payments under the collective agreement (Healy Consultants, 2021c).
Ireland as a country is equally exposed to external shocks. Particularly, the country was worse
affected by Brexit regarding trade relations with the UK, leading to increased costs of trading.
Furthermore, the country experiences the rising US protectionism reducing exports with
possible adverse effects on the country.
Therefore, Irish VAT tax, corporation tax, surcharge rental income tax, need to submit annual
financial statements and requirements for a resident directory and company secretary from the
country are prohibitive and bond deposits with the Irish Business Registrar are all prohibitive.
The situation is worsened by complex employer-employee relationships and also powerful
industrial unionization and concerns over external shocks drive away investments.
3.5. 3 Luxembourg Advantages
The associated and highlighted advantages are linked to the benefits of having a Luxembourg
company. For one, establishing a company in Luxembourg, a Luxembourg holding company
provides the associated benefits of the legal exemption for every local tax, including capital
gains, corporation, and withholding tax when the company holds a minimum 10% in an EU
resident share subsidiary for a 12-month continuous period (Healy Consultants, 2021b). The
tax incentive or vehicle is exploited in managing privately owned family investment portfolio.
A registered company in Luxembourg is only changed a 6% corporation ta for trademarks,
patents and registered designs. Furthermore, there is an advantage or enjoyment of zero
withholding tax charged on distribution payments. Furthermore, the country is both the World
Intellectual Property Organization (WIPO) member and the EU. Hence, a company registered
in Luxembourg is the perfect way to holding internationally enforced intellectual property
rights. Other advantages are summarized as below:
• Luxembourg is the popular host country for the registration of European investment
funds as collective invest fund vehicles including SICAVs, all exempted from capital
gains, corporation and withholding tax

• Withholding taxes were eliminated by the European Union Parent Subsidiary on
divides to be remitted between companies in the region
• No withholding taxes charged on royalties, interest or technical service fees needed to
be paid for any non-resident firm
• SICAR law exempts withholding tax on dividends reimbursed to shareholders for a
private equity firm.
• Opportunity for foreign owned companies for invest in all business areas as there are
no restrictions
• There is a highly skilled workforce in Luxembourg, a workforce enjoying 99% literacy
rate, with a 90% technical advancement. Hence, employees are productive and
efficient
• As a registered EU member, the business registration in Luxembourg ensures
unrestricted access to EU as well as the Shenghen market area for 26 developed
countries
• A globally competitive economy, ranking 18th for the possible 141 position for global
competitiveness on Global Competitiveness Index (Healy Consultants, 2021b)
Overall, Tax exemptions, elimination of withholding tax, no tax on interests or royalties, and
no restrictions for foreign investment, globally competitive economy and EU membership all
makes Luxembourg the best destination for registering a company.
3.5.4 Luxembourg Disadvantages
Luxembourg is perceived as a tax haven by all the member states of EU. Hence, EU
membership implies the obligation of the country to withhold the legal exemptions or holidays
for any holding company. Secondly, by registering a Luxembourg as a subsidiary operating
locally, there is a requirement or obligation on business permits and equally obligated to ensure
that there is a resident director (Healy Consultants, 2021b). Concerns have also been raised
about banking secrecy laws in Luxembourg, a major drawback for registering a company in
the country. The process of starting up a company in the country is considerably lengthy, taking
around three weeks and entirely a cumbersome process. Furthermore, major bottlenecks
associated with registering a company in Luxembourg include:
• Getting bank credit approvals is a complex process
• It is time-consuming to procure electricity in the country since it takes around 56
days to be connected
• There are no or little protection for investors. For instance, this country was ranked
at bottom 100 nations on investor protection
Overall, Luxembourg has a few disadvantages especially the complexity of getting credit
approvals, challenges with electricity access, limited investor protection. Business permit
requirements, bank secrecy laws, and a length process for establishing a business a company
in the country.
3.5.5 Liechtenstein Advantages
Registering a company in Liechtenstein comes with some advantages. For one, such a
registration, when properly outlined, enjoys a 2.5% effective corporate tax on the firm’s net
profits on global income related to trademarks, patents, and designs (Healy Consultants,
2021a). Furthermore, the country’s network of tax treaties provides incentives for reducing the
third country-imposed withholding tax. Besides, a business registered in Liechtenstein enjoys:
• Annual flat rate corporation tax of 12.5% charged on the firm’s net profits
• Free of withholding tax and capital gains tax

• Offering and providing services through EU and EEA as enabled by the Markets in
Financial Instruments Directive
• Investment income are free of local tax including royalties, dividends and interest
• Legal exemption from rental income from foreign dividends, real estate and capital
gains
A major advantage associated with Liechtenstein is its smallest size as a country and entirely
German-speaking nation not bordering Germany. Furthermore, the nation is renowned as the
efficient and discreet financial centre in Europe (Healy Consultants, 2021a). This makes it’s
the preferred and promising destination for establishing financial and banking service
businesses.
Generally, Liechtenstein enjoys low annual flat corporate tax, reduced third country-imposed
withholding tax, services offered through EEA and EU, free from local taxes and rental income
exemption from foreign real estate, dividends, and capital gains.
3.5.6 Liechtenstein Disadvantages
Liechtenstein’s law obligates all commercial entities in the country to have a residential
director, paid around 30,000 euros of capital shares with corporate directors not permitted
(Healy Consultants, 2021a). Businesses must submit their annual unaudited financial
statements to the Tax Authority of Liechtenstein. Furthermore, permission for doing business
is necessary and this comes as an obstacle or barrier that hinders business operations. Besides,
business registration is expensive in Liechtenstein, with yearly costs ranging from 15,000 euros
including tax and accounting fees, government license fees as well as the payment remitted to
the local director. It is also a concern that the country is signatory to limited double taxation
treaties. Besides, it is challenging minimizing global withholding tax when getting funds from
subsidiaries outside Europe. The country is relatively small, with below 40,000 residents
(Dumienski, 2017). Besides, it enjoys low unemployment rate ranging to 1.9% (Healy
Consultants, 2021a). This implies that hiring employees will be a challenge. Employer’s issues
are further worsened by the higher skills and educational levels. The most concern is that the
country is not in EU, meaning that it is not part of the VAT Information Exchange System
(VIES). The nation equally adopts Swiss VAT laws while but uses its own VAT administration.
This means that methods used in charging VAT is complex.
Generally, registering a company in Liechtenstein comes with major disadvantages including
the need for a residential director, submitting unaudited financial statements to the relevant
authority, the need to have the permission for doing business, expensive registration process,
and small country size with a small population.
Summary
Despite the tax exemption advantages, registering a company in Ireland is associated with
major disadvantages. For instance, there is the concern over the complex employer-employee
relations, especially the 11.05% PSRI mandatory contribution that must be directed to the
government. Stronger unionization is equally a concern. Employees have a lot of powers in the
country. Besides, being exposed to external shocks is not good for business, especially reported
as the worse affected by Brexit as regards trade relations with the UK. Hence, costs of doing
business are high in the country.
Apart from these limited advantages, registering a company in Liechtenstein is entirely
expensive. The country is relatively small, with around 40,000 residents, which beats the logic
of the larger GDP. Accordingly, the low unemployment rate of 1.90% implies that it will be a
challenge to get or hire employees. The country is not an EU member and uses Swiss VAT tax
laws thereby complicating the VAT charging complex.
Tax exemptions make Luxembourg a better investment destination because of advantages that
a company will have in tax deferrals. There are no restrictions for foreign investment with no
taxes on royalties and interest. Besides, Luxembourg is a globally competitive economy which
makes it attract foreign direct investment (hence more insurance market). Besides, EU
membership makes the country the perfect destination with its relaxed passporting laws.
Stronger regulatory environment also makes the country the best for insurance investment.
3.6. 0 Ease of Doing Business
The three countries are also compared by focusing on ease of doing business, focusing on areas
like starting a business, taxes, cross-border trading, contract enforcement, and minority investor
protection.
3. 6. 1 Luxembourg
Figure 1: Ease of doing business in Luxembourg (The World Bank, 2020b)
Figure 1 shows how Luxembourg ranks fairly in terms of ease of doing business, number 72
overall, with the scores for starting a business at 76. Although the protection of minority
investors is low, the country’s ranking for trading a cross borders is 1 and scores 100 overall.
This means that it is easier to set up a foreign company in Luxembourg and also attract cross-
border workers. Besides, contract enforcement scores high, 73.3, at number 18. This means
that enforcing insurance contracts will not be a problem in the country.

3.6.2 Ireland
Figure 2: Ease of Doing Business in Ireland (The World Bank, 2020a)
Figure 2 highlights how Ireland ranks fairly well in comparison to Luxembourg as the ease of
doing business score is 79.6, ranking 24 overall. The country fairs well in starting a business,
ranking 23rd, protection of minority investors at number 13, paying taxes 4th but ranks poorly
in enforcing contracts, 91st. Insurance covers and policies are about contract enforcement with
poor ranking in Ireland, this would not be the best destination for setting up an insurance
company offering ULIP.

3.6.3 Liechtenstein
Figure 3: Ease of Doing Business in Liechtenstein (The World Bank, 2020c)
Doing business scores in Lietchtenstein is low, at 64.8 overall with a 73.0 scores on starting a
business as shown in Figure 3. Protecting minority investors also scores low, at 30.0, and scores
for contract enforcement is also low at 59.8.
Summary
Luxembourg scores better in terms of the ease of doing business, at position 72 overall with 76
points in terms of starting a business. The country ranks number 1 in cross-border trading and
contract enforcement scores 73.3 and number 18 overall. This compares to Ireland with a score
of 70.6 on ease of doing business and 24th position. Yet, a concern is the poor enforcement of
contract, as Ireland ranks 91st. This means there will be a challenge enforcing business contracts
and insurance claims. Liechtenstein scores lowest in terms of ease of doing business, 64.8
points. Furthermore, enforcing contracts criterion for Luxembourg scores low, only 59.8
compared to Luxembourg’s 73.3 points. Hence, overall, Luxembourg ranks better in terms of
ease of doing business especially contract enforcement.
4.0 Discussion: Why Luxembourg
The reports, evidence and analyses point to Luxembourg as a success and promising country
for life insurance. Although the European region continues to grapple with the Brexit challenge,
this country’s policies on insurance shows a major investment potential for the proposed
company. The implication is that the country encourages freedom in carrying life insurance.
Accordingly, Luxembourg is a nation that leverages the large single market advantage in
growing its insurance sector. The large single market has favourable passporting and gives the
passport for selling services beyond Luxembourg; in all other countries of the target single
market with over 500 million customers. This has been the investment focus and consideration
of the country and explains why the country is apparently the leading in cross-border life
insurance services. For instance, the country boasts of around 20 billion held in premiums and
demonstrates an increasing trend. Of profound consideration is the strong growth in non-life
insurance, recording a record growth of over 20% to hold 3 billion in premiums held.
Secondly, the attractiveness of Luxembourg is evident with its ranking as AAA+ country. As
such, insurers are most likely to focus on a safer country. The country, therefore, ranks among
the 10 triple-A countries. Another aspect or element that makes Luxembourg attractive is the
nation’s interesting wider product ranking which responds to different cultures, specific needs,
as well as the client’s languages. Therefore, the multiculturalism and multilingualism of the
country makes it attractive for setting up a foreign insurance company. In addition, financial
and world of insurance centres are linked. As a world and regional centre, this is attractive for
both private banking as well as investment funds which complement the services offered by
life insurance.
Thirdly, setting up an insurance company in Luxembourg should also be subject to considering
and evaluating the impacts of Brexit. However, Luxembourg has been performing excellently
within the Brexit context. The country has been pushing for a soft Brexit which although
impossible, has not led to the burning of bridges with the UK. Luxembourg continues to make
and consider the concerted efforts for maintaining links and cooperating with the London
financial centre. For example, despite Brexit, in 2019, 11 insurance companies made the
decisions to set up in Luxembourg. This could only mean and point to the current situation in
Luxembourg, especially the already existing dynamic financial environment and centre.
Furthermore, Commissariat aux Assurances (CAA) is an able regulator specialized in dealing
with insurance issues. Although this regulator does not cover banks or investment funds, its
aim and focus has been on insurance.
Last but not least, the ever-increasing complexity of insurance products and their
personalisation contributes as an irreplaceable argument to makes Luxembourg a lucrative and
sound insurance destination. Luxembourg’s market is designed in a manner that everything is
being done and considered as possible for making the customers considerably happy. This is
reflected in the country’s insurance sector with commendable and amazing or satisfactory
results.
Before setting this company, opportunities and threats are equally of profound consideration in
Luxembourg. For instance, freedom to provide services within the insurance sector is firstly
affected by the opportunities in the economic digitalisation, which entails how companies
deliver the insurance services or benefits to their esteemed customers. E-commerce and
digitalisation imply more direct marketing whereby fewer intermediaries are involved. This is
a benefit or advantage to Luxembourg as a country with an exceedingly powerful and unique
data centre network, a properly and well-organised country and strategically located in Europe
thereby improving accessibility.
Another factor or area of profound consideration making Luxembourg an attractive country for
setting up an insurance company is that there has been the emergence of green finance. For
instance, this links to using life insurance and linking up the product or services to sustainable
finance. The country continues to be strongly involved or advocating for sustainable economy
as well as leveraging financial centres for realising the Paris Agreement on Climate Change
goals. The country is committed to promoting and investing in insurance products appealing to
the needs of the customers, especially their ecological demands like the ecological conscience
customers, which are considered as part of private interests by the customers.
However, investing in and establishing an insurance firm in the country also faces the profound
issues and challenges with threats, especially political and macroeconomic threats. One of the
challenges is the rising trade tension between China and the United States as well as the tension
between Europe and the US. The implication is that the freedom of providing the necessary
insurance services is enhanced by open markets policies and when the trade and economic
tensions among or between countries continue, the markets end up closing and that becomes
negative for the life insurance. Furthermore, there have been political tensions, especially with
the parliament elections in Europe. Despite these challenges, single market insurance services
continue unhinged and there is a greater growth prospect for the country’s life insurance sector.
4.1.0 Luxembourg Life Insurance Policy
Luxembourg as a country offers a life insurance policy through the Freedom to Provide
Services policy. Under this provision, the prudential law determines both the protection rules
of the invested savings and the related or associated rules linked to the underlying investments
acceptance. This is the underlying or central life insurance law in Luxembourg. However, the
contractual side of the insurance policy (life insurance) is defined or determined by the place
of residence of the policyholder. Accordingly, in Luxembourg, the tax regimes are dependent
solely on the policyholder’s place of residence which in some cases the beneficiaries within an
international inheritance regime. Hence, the specific law related to the life insurance policy is
determined by the policyholder’s place of residence. One of the advantages in Luxembourg is
that the company will be benefit from tax deferment as the policy holder is not liable for tax.
Therefore, the country enjoys tax neutrality. For instance, when a policy holder is a French
resident, the policy is not referred to as Luxembourg policy. Rather, it should be viewed as a
French policy being executed by a life insurance company in Luxembourg to which the
Luxembourg’s prudential rules are applicable.
4.1.2 Life Insurance Laws in Luxembourg
When setting up an insurance company in Luxembourg, both the laws of the policyholder’s
residence and Luxembourg should be considered. For instance, for the policyholder’s country
of residence, laws including the contractual aspects and effects are confines to issues like right
of surrendering, the right of nominating a beneficiary, the ability of accepting the clause’s
irrevocability.
Yet in Luxembourg, the law focuses on the policy’s financial aspects. For instance, when
setting up an insurance company, the company and its customers are assured of laws protecting
the invested savings, including the status of the policyholder as the preferred creditor as well
as assets segregation. Furthermore, the country’s law protects their policyholder’s underlying
assets acceptance as provided under the Circular-Letter 15/3 of the Luxembourg Insurance
Authority - CAA. Another inherent law of consideration is the legal provisions in public
interest. These laws or provisions are more of concerned with the Luxembourg as a country,
including accounting, financial and prudential standards which are guided by the Home
Country Control rule.
Other legal provisions and considerations are taken within the context of international laws on
insurance coverage. For instance, with the signing of the Treaty of Rome, 1980, policyholders
have the freedom of choosing the relevant law aligned or aligning with their insurance policies.
Hence, they always consider from their home country. Also, of profound consideration in this
regard is the public interest regulations that align with the residence country of the
policyholder. Therefore, such rules are considered as applicable when they show profound
justifications, non-discriminatory, proportionately and objectively necessary for the pursued
objectives.
Investing in Luxembourg equally presents the opportunity of harnessing and leveraging the
opportunity of the available professionals in the insurance sector. For instance, the country has
insurance professionals with many years of experience in developing solutions and incentives
for meeting the challenges facing multinational corporations. Therefore, they are best suited in
the contemporary business environment that is defined and characterized by dynamism and
incessant changes or transformations. Moreover, these professionals operate or function as
highly mobile individuals and world citizens. With investment funds and banks, most insurers
have been exploiting the international expertise and talent from Luxembourg. They are
multilingual in nature with the sales team speaking the language of the client. Accordingly,
most of the professionals in Luxembourg understand and are well-versed with the skills and
expertise for providing insurance products for clients across the European region in compliance
with the local tax rules and regulations. Setting an insurance company in Luxembourg is a
ticket to enjoying a prolific insurance market or environment with 91 insurance companies and
a host to 196 reinsurance corporations.
4.2.0 Luxembourg’s Dedicated Insurance Regulation
Another area of profound consideration that makes a country lucrative for insurance
development and investment is the regulatory environment. For instance, Luxembourg, as
shown from the above analysis is a country with a sound and constructive regulatory
environment along with supervisory quality (LuxembourgforFinance, 2021). As such, these
two elements and aspects of insurance market are key and crucial to the international insurance
companies and explain why Luxembourg is considered or chosen as a preferred EU base. CAA
oversees the insurers based in Luxembourg, a body considered as the best dedicated regulator
within the UE region. This offers protection to the investors through the enforcement of strict
conformity with EU and international standards. In so doing, the dedicated regulator provides
Luxembourg with the secure and advanced framework for safeguarding maximum security to
the customers.
4.2.1 Higher Investor Protection Levels
Another reason for choosing Luxembourg as the preferred destination or choice for setting up
an insurance company is its triangle of security. This security arrangement or set up offers and
provides an extra extent of investor security and protection, a unique arrangement within the
European region (LuxembourgforFinance, 2021). This triangle, as seen from the above
analysis, focuses on three major and sound elements. For one, the regulator is obliged to
approving the custodian bank choice of the insurer. Therefore, the regulator has the opportunity
or mandate of freezing the life insurance company’s assets when unforeseen uncertainty or
risks are evident or imminent (Rupeika-Apoga et al., 2020). Also, part of this triangle entails
the three-way contract between the regulator, insurance firm and the custodian bank specifying
that all three parties govern the custody of the assets (Merouani, 2018). Another form or aspect
of security comes from the consideration that all assets aligned to life insurance contracts have
to be separated from other assets of the insurance company and deposited in a different or
separate bank account. This type of arrangement protects or cushions the policyholder against
any form of uncertainty or risks in the market (LuxembourgforFinance, 2021). The final aspect
or element of the triangle is the custodian bank being obligated to separate assets that have
been linked to the life insurance contracts from the company’s other assets. In Luxembourg,
an insurance company enjoys the Super Privilege guarantee. Under such arrangement or
consideration, the insurance contract holders have a preferential claim over all involved parties
when a default occurs.
4.2.2 Life Insurance through sophisticated Management Tool
One major advantage of operating in Luxembourg is the country’s complex life insurance
contracts, presented or reported as the country’s international wealth management provision.
The implication is that the life insurance products and service offerings in Luxembourg are
unique since they provide better and unique protection levels for the sophisticated clients along
with their families (LuxembourgforFinance, 2021). Investing in this country will be the most
fruitful and prolific because the life insurance is backed by one of the strictest investor
protection jurisdiction worldwide through national law which equally has a higher flexibility.
In so doing, Luxembourg life insurance agreements or contracts are among the best incentives
and tools for managing assets and planning for succession (Rupeika-Apoga et al., 2020). The
success of managing insurance policies and products in this country is specifically attributed
to the international product portability along with investment flexibility, especially the contract
currency choice, product choices along with the possibility of combining contracts having
different financial vehicles (Hou et al., 2012). This means that the asset management
approaches or solutions can be easily and conveniently adapted to the international lifestyle of
different policyholders in addition to permitting the organization of different portfolios
scattered throughout diverse geographical regions.
Furthermore, investing in Luxembourg is an advantage and opportunity for enjoying the
country’s long history as the major captive reinsurance centre. This is evidenced by many
international leading non-life insurers setting up EU continental hub in the country to ensure
that they can serve their European clients effectively. This include CAN Hardy, FM Global,
AIG, Swiss Re, Liberty Mutual along with Asian firms like Tokio Marine Japanese Sompo
International notwithstanding Aioi Nissay (LuxembourgforFinance, 2021).
4.3 Case Example
The case study on mobility of ULIP is provided by the Life Insurance 360 (2021). The context
of the case is of a French national who has been residing in Luxembourg as a tax resident. The
heirs are his two daughters who are French tax residents. The objective of the case is on
transferring the old man’s asset between Luxembourg and France, ensuring that his net equal
amounts have been inherited on equal basis by each daughter.
The first case of consideration is what happens upon the father’s death. This is a scenario of a
French national who has taken two insurance policies on his life as permitted by the
Luxembourg law. Therefore, each daughter has been nominated as a beneficiary. The first life
insurance policy (life insurance policy A) entails the father as the policy holder, and the assured
asset is his life (Father Life assured) and the first daughter is nominated as the beneficiary. The
second life insurance policy is Policy B for the second daughter.

Second scenario consideration is that five years later, one of the daughters has moved to
Luxembourg to pursue a career opportunity. Therefore, the father makes a decision on
redeeming policy A completely and making a gift to this daughter who has become a
Luxembourg resident. From this, the daughter reinvests the lump sum money by taking up a
life insurance under the Luxembourg insurance policy law (LifeInsurance360, 2021). This
creates life insurance policy C, with the first daughter becoming the policyholder, has assured
her life and first daughter beneficiaries. The term of this policy is more than 6 months and there
are no charged taxes on the surrender value.
After the father has reached 70 years, he has knowledge about his two daughters not expected
to receive the same amount upon his death. This is because there are differences in taxation
between France and Luxembourg. This prompts him to take up another new life insurance for
the daughter living in France as a French tax residence. He makes the decision of switching the
policies into investments in private equity funds. This is aimed at generating long-term capital
gain and also to ensure compensation for the difference between the two daughters regarding
the taxation. Therefore, the question to be asked is what will happen if the father dies 10 years
to come. Life Policy B (for the second daughter) and Life insurance policy D (which the father
took) will be remitted to the second daughter as the beneficiary. Therefore, contract D will be
about the premiums transferred to the second daughter as the beneficiary when the father was
below 70 years to the second daughter. This will include 15, 250 tax deductions in France, with
a 20% flat-rate tax for up to 700,000 policy value and above this, 31.5% (LifeInsurance360,
2021). Contract D include the premiums transferred after 70 years. This will include 30,500
tax deductions on the insurance premiums with an imposed up to 45% inheritance on the
premiums to be paid. Life insurance Policy C is for the first daughter who changed or
subscribed to life insurance under Luxembourg’s laws. She will keep the policy and there will
be no inheritance tax charged on her.

When the father dies, lump sum death benefits will be paid without inheritance tax in
Luxembourg. When a daughter is living in Luxembourg and the father’s insurer is in
Luxembourg, the daughter has two options for following the claims (LifeInsurance360, 2021).
One of the options is keeping the policy under the prevailing Luxembourg law. Secondly, she
has the option of changing the applicable law so that France law can be adopted. In such a
scenario, she will be subjected to the tax laws or regimes in France as her country of residence.
Such an example shows the flexibility of the Luxembourg’s insurance regulatory environment.
5.0 Conclusion
Overall, setting up an insurance firm for offering life cover and non-life cover coverage in
Luxembourg should be subject to a proper understanding of the European insurance market.
Factors driving this market or product area include new technology for innovation, regulation,
and demographic changes. For example, technology means that the success of the venture will
depend on the degree and capacity of digitalizing the insurance service provision to the target
customers or audience. Many people now want easier and convenient services especially when
they want premium writing contracts and pursuing claims. Also, there is a demographic change
in the past decades as life expectancy continues to improve or increase in Europe. The general
notion or issue of consideration is that with many ageing populations, there is a call for
insurance companies to focus on product diversification and innovation to meet the change.
Yet, the most important factor is the regulator environment in Europe. Insurance as wealth is
all about the security that the firms provides or guarantees for the vested or invested premiums.
The European market has the necessary measures and incentives for protecting policyholder’s
insurance policies. This makes it a prolific and prospective market for any insurance business
set up.
The focus has been on Luxembourg, a country reportedly having the right professional base,
multilingual and multicultural. When compared to Ireland and Liechtenstein, Luxembourg is
the best fit for ULIPs or any wealth insurance because it serves as an insurance and financial
hub or centre not only for Europe but the world at large. Furthermore, there are many cross-
border professionals from France, Belgium, and Germany whom the company or business will
rely upon for professional skills, expertise, and experience. The country has larger and
considerate premium assets or insurance assets while equally enjoyed in its jurisdiction are the
many insurance and reinsurance companies. The ease of doing business is also a driving factor
as the country is home to different foreigners whose life and transition into the European nation
is made easier by the high quality of life. For the life insurance premiums and plans, cross-
border transfers are easier as the policyholder’s next of kin can choose the country or laws
which he or she wishes to apply. There are also no tax charges on such transfers and the
company will enjoy or benefits from such tax defers. The security triangle also protects
investors and Luxembourg is reported as a strong regulator that safeguards the investment of
different customers.
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Journal of Insurance and Financial Management, Vol.

5, Issue 2 (2022) 23-73

Where to Set Up a Unit Linked Life Insurance

ARTICLE INFO ABSTRACT

Journal of Insurance and Financial Management

Journal of Insurance and Financial Management (ISSN-Canada: 2371-2112)

entrepreneurs would love to establish a company in a lucrative economy, especially regions

safeguarding such investments.

by considering the risks associated with capital markets (Ostrowska-Dankiewicz, 2017).

(Yuldashev, 2020). In so doing, insurance providers always focus on providing a variety of

funds, stock and diversified reserves (Bosserhoff & Stadje, 2019).

relatively longer period of time (Ostrowska-Dankiewicz, 2015). Equally, this is considered by

different life stages.

1.1 Purpose and Objective

professionals available, languages spoken, regulatory, DTTs, and EU or European Economic

offering Unit-linked life insurance plans (ULIPs).

2.0 Materials and Methods

Luxembourg, comparing the country to alternatives like Ireland and Liechtenstein.

3.2.0 Trends in the European Market

3.2.1 Europe’s General Insurance Market Trends: Opportunities and Challenges

other life insurance (EIOPA, 2019).

the Member States amounting to 6.6% (EIOPA, 2019).

customer’s comprehension of the products, lack of transparency, conflict of interests, product

policies to vulnerable customers or subscribers (Grima, 2020).

success in the European market.

customer’s needs throughout the lifecycle of their products.

exacerbated by compliance risks. Furthermore, the market reports an increasing prevalence of

have risen or increased over the past.

3.2.2 Europe’s Life Insurance Sector

management of claims, digitalization issues and concerns, customer segmentation, cross-

3.2.3 Unit-Linked Insurance Plans in Europe

et al., 2018; Grishchenko, 2020).

multi-faceted decision-making criteria as well as digitalisation imperative. The report noted

recommending the ULIP.

changing or evolving regulatory environment.

3.3.0 Overview of Luxembourg

3.3.1 General Overview of Luxembourg

immigrations or better still, cross-border workers (Le Gourverment du Grand-duche de

Gourverment du Grand-duche de Luxembourg, 2021).

hinder a professional from working in the Luxembourg.

Luxembourg equally boasts of multilingual and international working environment. The

technology, and biotechnology while similarly encourages research and development

with many European financial institutions located in the Luxembourg capital.

Gourverment du Grand-duche de Luxembourg, 2021). The country’s National Employment

that resonate with their business.

true international setting.

3.3.2 Professionals Available

Luxembourg enjoys a powerful economy that produces a constant movement of dissimilar,

(Le Gourverment du Grand-duche de Luxembourg, 2021). The country is similarly a vivacious

commercial hub and pays homage to a number of European establishments, relying on

du Grand-duche de Luxembourg, 2021).

producing an incessant influx of assorted, confident, as well as well-paying employment

openings (Le Gourverment du Grand-duche de Luxembourg, 2021). Luxembourg has been

correspondingly attracts a larger international artist base, especially bands. As mentioned

and their next generation (Le Gourverment du Grand-duche de Luxembourg, 2021).

the country and employment opportunities. There is a readily available cross-border

and experienced workforce from other parts of the world).

3.4.0 Country Comparisons: Luxembourg, Ireland, and Liechtenstein

3.4.1 Insurance Companies

insurance companies, compared to 130 insurance companies in Ireland as of 2017

insurance (Pourplanche, n.d). Hence, in terms of the number of insurance companies,

Luxembourg is superior to Ireland and could be considered as a country with more

opportunities for establishing or building an insurance company.