A proposed change to France’s tax rules could require some Luxembourg-based life insurance policies to be restructured if their holders are to retain the French tax treatment available to life insurance. The proposal concerns policies with particular investment arrangements, including dedicated funds holding assets linked to a policyholder’s family or business interests.
The proposed measure appears in Article 6 of France’s draft Finance Bill for 2027. Although Luxembourg is not explicitly named, the provisions described in the proposal could affect foreign-issued policies, including those held by French residents through Luxembourg insurers. The changes are not yet enacted, so their eventual scope and application remain subject to the legislative process.
According to Delano, the draft sets out three cumulative conditions for a foreign life insurance policy to continue benefiting from France’s life insurance tax advantages. First, premiums paid from 1 October 2026 onwards would have to be paid in cash, meaning that a direct contribution of securities would not qualify under the proposed rules.
Second, investment units would need characteristics comparable to assets authorised under the French Insurance Code. The draft does not yet specify how that equivalence would be assessed. Conventional collective investment schemes appear less exposed to uncertainty, while some unlisted assets and investment vehicles authorised in Luxembourg could require closer examination.
The third condition concerns dedicated funds designed for an individual policy or a closed group of contracts. Under the proposal, such funds could no longer contain assets issued, guaranteed or owed by the policyholder, the insured person or a beneficiary, or by specified close relatives and companies they control. The restriction could also extend to intermediary entities meeting a threshold that has yet to be established by decree. Funds whose value or returns depend primarily on a family business’s shares could therefore fall within the scope of the proposed rules.
The potential exposure matters to Luxembourg’s insurance sector because dedicated funds represent a substantial part of its life insurance market. The article cites figures from Luxembourg’s Commissariat aux Assurances showing that insurers collected €16.86 billion in premiums on policies backed by dedicated funds in 2025. That represented 48 per cent of all life insurance premiums recorded by the regulator, with premium income from these policies rising by 25.35 per cent year on year.
The figures do not establish how many policies would be affected. The regulator does not specify how many dedicated funds belong to French residents or how many contain assets linked to policyholders. The article also reports that French policyholders accounted for nearly €122.97 billion in provisions at the end of 2025, equivalent to 42.4 per cent of the total reported to the Luxembourg regulator.
Under the draft timetable described by Delano, contracts taken out on or after 1 October 2026 would face the new conditions immediately if the legislation were adopted, while existing contracts would be subject to the conditions from 1 July 2027. For income-tax purposes, the proposal distinguishes income derived from premiums paid on or after 1 October 2026 from gains relating to earlier payments. The treatment of benefits paid after a policyholder’s death could also be affected, with compliance assessed on the date of death for deaths occurring from 1 July 2027.
For policyholders, the immediate issue is whether a contract contains a dedicated fund and whether its direct or indirect holdings are linked to family or business assets. The proposal does not mean that every Luxembourg life insurance policy would have to change. Its practical impact will depend on the final legislation and the characteristics of individual contracts.
