Offshore insurance bonds do not work the same in every country
Offshore insurance bonds are frequently marketed to internationally mobile investors because they can offer investment flexibility and, in some countries, tax deferral or estate-planning advantages. But a product that works in one jurisdiction does not automatically work—or even have the same legal status—in another.
The Isle of Man, Jersey and Guernsey are not EU member states. Their insurers do not have automatic passporting rights across the European Union. An EU resident being actively marketed an offshore policy should therefore establish the legal basis on which the insurer and intermediary are providing the service in that member state.
The answer can depend on how the business was initiated, the status of the insurer, whether an appropriately authorised EU intermediary is involved, local implementation of insurance rules and the precise nature of the product. Broad claims that every offshore bond is ‘illegal’ in the EU are too simplistic; equally, assuming that an offshore licence automatically permits EU marketing is unsafe.
Tax is a separate question. A policy may be recognised as life insurance in its home jurisdiction but receive different tax treatment in the client’s country of residence. Personalised portfolio features, investment control and the amount of genuine insurance risk can all be relevant under local rules.
Consumers should ask for written confirmation of the distributor’s permissions, the insurer’s basis for serving residents of the country, the applicable complaints and compensation arrangements, and advice from a local tax professional on how withdrawals, gains and death benefits are treated.
Cross-border insurance can be perfectly legitimate, but legality, suitability and tax efficiency must be established for the client’s actual country of residence—not assumed from the product brochure.
If your circumstances involve more than one country, speak to an appropriately regulated adviser before changing a pension, investment or estate-planning arrangement.
