Having dealt with Switzerland’s banking industry, the U.S. judiciary now is setting its sights on Swiss insurers. Swiss Life faces a substantial fine because of risky life insurance policies.
About ten years ago, Swiss Life, the country’s biggest life insurer, started selling so-called «Wrappers». These are life insurance policies which help save paying taxes, much like similar instruments sold by financial-services companies, often in conjunction with pension provisions.
While this is a legal way of reducing your tax bill in your home country, some foreign customers bought the policies to evade paying taxes. Which is why Swiss Life has become the target of suspicions of abetting such – illegal – tax evasion.
Alternative Hiding Places
The practice became more prevalent when banks such as UBS closed accounts of U.S. clients, who were suspected of holding untaxed assets at the Swiss bank. A number of those clients bought «Wrappers» instead to keep their assets hidden from the U.S. taxman. The business with «Wrappers» sold to U.S. clients reached as much as 1 billion Swiss francs at Swiss Life in its heydays.
This is the business that has caught up with Swiss Life. The U.S. judiciary has approached the Swiss company in recent days with a view to investigate the business. First indications that the «Wrappers» one day might come back to haunt the firm appeared three years ago when «The Wall Street Journal» reported on the subject. At the time, the authorities didn’t seem to take action though.
Unwanted Attention
But now the Department of Justice (DoJ) has become active and is looking into the U.S. portfolio of Swiss Life Liechtenstein and Swiss Life Singapore, currently worth about 250 million Swiss francs, according to a statement today (in German). Of course, the DoJ is more likely to be more interested in the 1 billion francs previously mentioned and is unlikely to issue a potential fine in relation to the quarter billion francs held by the Liechtenstein and Singapore units.
Swiss Life seems to be the only insurer currently under investigation for this type of product, which is why there are no lead cases to go by. If one would judge from how the banks have been treated, Swiss Life could face a fine of as much as 70 million francs. Of course, for the time being, this is pure speculation.
A Profitable Business
The problem is that Swiss Life faces allegations of having abetted tax evasion, much like numerous banks. The company therefore is eager to use the opportunity to present its cross-border business in cooperation with U.S. authorities, Swiss Life said.
Nowadays, all insurance policies issued by Swiss Life are registered according to the FATCA regulatory framework, a spokesman for the company told finews.com. The «Wrappers» business currently is worth 17 billion Swiss francs. It has been profitable since 2013.
If the epic investigation into the Swiss banking industry is anything to go by, Swiss Life faces a very lengthy process – generating costs and absorbing expensive management resources.
