The taxation of unit-linked life insurance policies and capitalisation bonds will change as of 1 January 2020. For companies, the new rules are applied to financial years, starting January 1st 2020 or later.

The tax reform will also impact the investment procedure for self-managed policies. The below note gives a summary of the key changes as well as key elements and action points to consider in order to be compliant with the new law.

Summary of the changes and impact on unit-linked insurance:


Taxation of gains

According to current tax practice the invested capital can be withdrawn first without tax consequences. As of 2020, the proportional gains within a unit-linked life insurance will be taxed in connection with a withdrawal from the insurance policy/capitalisation bond.

Example:  If the policy has 20% of gains, this means that 20% of a withdrawal is taxed as capital income whereas 80% is a tax free return of capital. 

Deductibility of losses

According to current practice, a loss from a unit-linked life insurance/capitalisation bond cannot be deducted from the taxation of the policyholder unless the income is taxed as business income of a corporate policyholder. 

As of next year, losses will be deductible in case of a full surrender or at the end of the contract term. The losses are taken into account when determining the capital income deficit and can be carried forward for 10 years.

Policyholders in need of liquidity should discuss various options available with their adviser to ensure their wealth plan is in line with their current and future needs. 


Tax reporting

Lombard International Assurance will calculate the gains/losses related to withdrawals from the policy and provide policyholders with the information needed to complete their Finnish tax returns.


Special taxation of certain insurance contracts

A new look through taxation will be applied to policies/capitalisation bonds where the policyholder maintains certain ownership rights to the underlying assets such as use of voting rights, deciding on the terms of sale of the investments or signing third party contracts such as investment management agreements on behalf of the insurer.

The new look through taxation is aimed at artificial insurance arrangements. 

However, it will also apply e.g. where the policyholder communicates changes to the investment allocation directly to the custodian bank or an investment manager of the policy which is common practice for self-managed policies where the insurer operates within an open architecture framework.

As of 1 January 2020 all changes to the investment allocation must be communicated to the insurer. In addition some investment management contracts may need to be amended. 


How is Lombard International Assurance prepared to cope with the new law? 

Lombard International Assurance has been servicing the Finnish market for 22 years and is committed to continue being a preferred wealth structuring partner for years to come, including on self-managed policies. 

We are therefore implementing changes to processes, contracts and policy documentation to ensure compliance with the new legislation. 

There will be a new investment procedure for self-managed policies whereby policyholders are requested to set up a Lombard Connect account in order to submit requests to the insurer to change the investment allocation. 

Lombard Connect is our digital servicing platform that was launched in 2017 which already allows policyholders to access policy information, monitor the progress of transactions and stay up-to-date with policy investments. We are extending its functionalities, to all our Finnish policyholders, to allow them to continue to make any changes to their policy investment allocation in full compliance with the new law.

As a next step, all our Finnish policyholders will receive their updated policy terms and conditions as well as instructions on how to set up Lombard Connect, in order to request changes to the investment allocation. 


Check out a short explanatory video of what Connect can do.  


Why choose life insurance as a wealth planning tool going forward?

Life insurance will continue to be an attractive wealth management tool as it is a simple yet comprehensive solution, offers a broad range of investments, deferred taxation and simplified tax reporting as well as flexible succession planning. 

As the life of wealthy families is becoming increasingly mobile, the importance of cross-border solutions for wealth and succession planning and the ability to comply with the rules in multiple jurisdictions across Europe and beyond becomes more important.

The new provisions provide increased certainty for policyholders as there will be specific provisions in the income tax act and the business income tax act regulating the taxation of unit-linked life insurance and capitalisation bonds. 

Why Lombard International Assurance?



Check out our Benefits Summary for Finnish policyholders.