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In the below, Insurance Europe addresses the question of treatment of pre-existing cash value insurance and annuity accounts under the CRS. In particular, Insurance Europe provides further recommendations on the meaning of the condition of "effectively prevented by law" and on the application of the residence address rule under Section III B.1, in order to address unique concerns of the insurance sector in Europe.
Furthermore, InsuranceEurope provides comments on self-certification and on the definition of insurance wrapper products under Section VII concerning special due diligence rules of the CRS.
InsuranceEurope believes that pre-existing cash value insurance and annuity contracts should be excluded from the scope of CRS to ensure a reasonable and proportionate compliance burden relative to the very low level of tax evasion risk these policies present.
Given the long term nature of life insurance, contracts may extend for more than 60 or 70 years. As a result, contracts and administration systems for pre-existing life insurance policies and annuities may have been designed many years ago, prior to any systems for the automatic exchange of information. As a result, the information necessary to identify a foreign tax person is often not available for review, as existing systems have never been designed to capture and store this data or permit an electronic search. Furthermore, the number of policies in force makes any manual searching practically impossible.
In conclusion Insurance Europe stated that to ensure a reasonable compliance burden on life insurers, the Commentaries should be revised as noted above, to take into account the unique aspects of life insurance (such as the very long term nature of contracts, which can extend for 40 or 50 years) and the fact that life insurance is historically a much lower risk of being used for tax evasion than other financial products.