Insurance dates back to the Middle Ages. In Old Germanic communities, the first guilds were established in the medieval era. They offered their members support for events such as illness, theft, loss of livestock, fires and bereavement. This type of cover has survived to this day, especially with regard to insuring against risks. Insurance is rooted in the principle of solidarity within a defined group of people. As time has gone on, a further element has been added to the traditional concept of insurance protection – saving as a way of making financial provision for later in life.
There is no fundamental difference between saving via an insurance policy and wealth or asset management – both models can be used to make financial provision, as well as to build and safeguard wealth.
That said, from the regulatory perspective insurance offers significant advantages. The state has an interest in ensuring that all its citizens, as well as drawing on state pensions and social security, also take out relevant insurance cover to provide for themselves. As a result, governments frequently offer incentives to policyholders in the form of tax breaks.
At the same time, the state imposes strict rules on the insurance industry. Insurers are subject to rigorous and recurring supervision when it comes to criteria such as solvency, reserves, levels of cover and financial obligations. The fundamentally stringent approach adopted by the state towards the industry can almost be seen as a guarantee of insurers’ security.
Over the past 15 to 20 years, international insurers have specialised in the wealthy private clients segment. Like all other policyholders, affluent clients also benefit from the advantages of using insurance policies for savings purposes. As I outlined above, regulators consider an investment within an insurance policy to be a form of financial provision. As a result, the state grants incentives in the form of tax breaks while ensuring regulatory supervision, irrespective of the sums held within the insurance policy.
Insurance solutions for wealthy private clients can be divided into two groups.
This solution is predominantly used for succession and tax planning. These policies incorporate no – or very little – conventional (biometric) life insurance risk. However, they are structured such that they are deemed to be a form of life insurance – with the attendant tax breaks – as far as the regulatory and tax authorities are concerned. This type of insurance has become firmly established for European clients who are also domiciled in Europe. The providers are generally companies whose registered office is in Liechtenstein, Luxembourg or Ireland, while some are domiciled in other EU member states or overseas. These policies can be offered under rules covering the freedom to provide services within the EU.
This group is classified as conventional insurance in that the policies combine retirement or savings capital with a high level of insurance cover. They are mainly used for liquidity and succession planning. Policyholders can also take advantage of tax breaks in many countries, irrespective of whether the policies are deemed to qualify as insurance for regulatory or tax reasons. The insurance company is in charge of investing the assets. The providers are companies whose registered office is located overseas, and the offering is targeted towards clients whose tax domicile is outside the EU.
Conclusion: Insurance policies have numerous advantages
Individuals who decide to put their investments or savings into an insurance policy can be certain that this option offers security and stability at all times. The benefits are obvious:
These features offer the very peace of mind desired by demanding clients seeking savings products as part of an insurance policy.
About Stefan Bischofberger
Stefan Bischofberger is a member of the Board of Directors of swisspartners life insurance companies in Liechtenstein and Austria that provide private placement life insurance for clients resident in Europe.
He is also a Senior Consultant at IPG Howden based in Liechtenstein with a focus on Russian and Turkish high net worth clients. Prior to IPG Howden, Stefan Bischofberger was a founder and Managing Partner of Swiss Insurance Consulting & Brokerage Family Office Ltd., a brokerage firm providing life, health and other non-insurance solutions to affluent individuals and families.
Previously, Stefan was the Chief Market Officer and a member of the Executive Committee at Swiss Life’s International Division, where he led sales strategies for private and high net worth clients worldwide. Stefan previously held leadership positions at Swiss Life as well as Credit Suisse Life in Liechtenstein.
Stefan graduated from Zurich University of Applied Sciences (ZHAW) with a degree in economics.
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