Rich Luxembourgers to drive growth in life insurance market

6 May 2016

A growing number of high net worth individuals (HNIWs) is expanding opportunities for life insurers in Luxembourg, according to a new report from Timetric’s Insurance Intelligence Center (IIC).

According to the report, after posting a relatively sluggish growth over the review period (2010-2014) the life insurance segment in Luxembourg is set to improve. It is forecast to grow at a CAGR of 6.8% from EUR23.8bn (US$31.5bn) in 2014 to EUR33.1bn (US$38.0bn) in 2019. Strong demand from HNWIs and UHNWIs due to a favourable tax regime, guaranteed capital and tailoured wealth management solutions are the core drivers behind this growth.

"The developed financial sector and investor-friendly taxation system makes Luxembourg an attractive destination for cross-border life insurance and it acts as a center for global insurers to launch new policies under the EU's freedom of services provision. The country is a hub for foreign financial investors, as life contracts can increase the value of an investment as they are not subject to taxes; this also makes Luxembourg attractive to wealth managers," comments Jay Patel, Insurance Analyst at Timetric's IIC.

According to Timetric's sister company WealthInsight, Luxembourg's HNWI population rose from 17,665 in 2010 to 18,530 in 2014, at a CAGR of 1.2%; it is expected to reach 20,758 by 2019, at a CAGR of 2.3%. Similarly, the population of ultra-high net worth individuals (UHNWIs) rose from 568 in 2010 to 599 in 2014; it is projected to reach 679 by 2019. As a result, more insurers are looking to expand their product portfolios by adding niche HNWI solutions. For example, in January 2016, Lombard International Assurance announced plans to acquire the Luxembourg-based private banking solutions business of Zurich Eurolife, to focus more on HNWI savings solutions.

"Life insurance in Luxembourg offers advantages and is used as an investment tool by HNWIs and foreign investors. Low interest rates have made life contracts an attractive investment product for the rich, with higher returns, lower risk and guaranteed capital on maturity," Patel comments.

Life insurance accounted for 88.2% of the Luxembourg insurance industry's gross written premium in 2014, driven by rising life expectancy, a supportive regulatory framework and favourable demographic conditions. The segment grew at a CAGR of 1.5%, from EUR22.4bn (US$29.6bn) in 2010 to EUR23.8bn (US$31.5bn) in 2014.

All information is based on the Timetric report: 'Life Insurance in Luxembourg, Key Trends and Opportunities to 2019'.

Source: Company Press Release