1. Background
The Luxembourg Branch 6 capitalisation contract is an essential and relevant financial product for Belgian corporate entities.
Holding and managing an investment portfolio held directly in a securities account by a Belgian entity involves significant administrative and tax burdens. These complexities can be mitigated if the Belgian entity transfers its investment portfolio into a Branch 6 unit-linked capitalisation contract. In this arrangement, the insurance company assumes responsibility for managing the portfolio according to the subscriber's preferences or, in most cases, delegates its management to a discretionary asset manager, all in compliance with Belgian regulations.
The tax regime applicable to the Branch 6 capitalisation contract for Belgian entities has been a long-debated issue, with various contradictory rulings from the Belgian tax administration. This debate was resolved when the Belgian legislator clarified the tax regime through a law enacted at the end of 2023. Since 2024, Branch 6 capitalisation contracts subscribed by Belgian entities enjoy tax certainty.
Lombard International Assurance, now part of Utmost Group, introduced its Branch 6 capitalisation contract to the Belgian market in late 2021 from its Luxembourg head office, followed by its Belgian branch in 2022. This product is specifically designed for legal entities and cannot be subscribed to by individuals. The product's appeal to Belgian legal entities lies in its ability to simplify administrative
2. Position of the Belgian Financial Regulator (FSMA)
In 2019, the Belgian Financial Regulator (FSMA) first notified some Luxembourg insurance companies offering the Branch 6 capitalisation contract that it did not agree with the product's distribution in Belgium. FSMA based its stance on a strict and arguably debatable interpretation of the EU Solvency II regulation, concluding that capitalisation products must have a fixed return to fall under the EU freedom of services provisions for insurance products as defined by the Solvency II Directive.
However, Belgian law, which transposed the Solvency II Directive into national legislation in 2016, explicitly includes a broader definition of capitalisation contracts. This definition encompasses not only fixed-return contracts but also unit-linked contracts tied to investment funds.
In March 2024, FSMA reiterated its position by sending a new round of letters to Luxembourg insurance companies, advising them to seek clarification from the European Insurance and Occupational Pensions Authority (EIOPA) on the interpretation of the Solvency II Directive. In November 2024, FSMA further communicated its stance to a number of Belgian insurance intermediaries, causing further uncertainty within the intermediary network.
3. Position of the Luxembourg Insurance Sector
In response to the growing uncertainty among Belgian intermediaries, the Luxembourg Association of Insurance and Reinsurance Companies (ACA) engaged in extensive discussions on the matter in December 2024. On January 8, 2025, ACA issued an official statement asserting that FSMA's position is unjustified as it contradicts applicable legislation and violates EU principles of freedom to provide services and free movement of capital.
ACA concluded its statement by affirming that it will take the necessary steps to defend the right of Luxembourg life insurance companies to distribute Branch 6 capitalisation contracts in Belgium and ensure that Belgian clients can access these products.
In the meantime, it appears that FSMA has itself raised the issue with EIOPA. Consequently, the interpretation of the Solvency II Directive concerning capitalisation contracts is expected to be addressed at the European level, potentially involving both EIOPA and the European Commission.
Nicolaas Vancrombrugge,
Senior Wealth Planner Belgium & Luxembourg