The 2027 draft Finance Bill contains several provisions that could raise questions for clients and prospective clients with policies issued by foreign insurers. While the implications for life insurance policies are considered below, it is not yet clear whether capitalisation contracts will also fall within the scope of the proposed measures.
The Proposed Changes and the European Law Context
While it is difficult to draw definitive conclusions about the scope of the proposals at this stage, an important consideration is the division of responsibilities between jurisdictions.
Technical and prudential rules, including those governing the eligibility of assets within a policy, fall within the jurisdiction of the country in which the insurer issuing the policy is established. The same applies to rules governing the payment of insurance premiums.
Any measures that potentially challenge this division of responsibilities therefore need to be considered in the context of European law.
Article 6 of the draft Finance Bill proposes three cumulative conditions that would need to be met for a policy issued by a foreign insurer to qualify for the preferential tax treatment.
Condition 1: Premium Payments by Contribution of Securities
The first condition concerns how insurance premiums can be paid.
The draft Finance Bill provides that, from 1 October 2026, premiums must be paid in cash, in accordance with the first paragraph of Article L. 113-3 of the French Insurance Code.
This raises questions in light of a decision by the Court of Cassation on 19 May 2016. The Court held that the technical and financial characteristics of the policy were governed by Luxembourg law, as the law of the country in which the insurer was established, and that this permitted the contribution of securities to closed-end dedicated funds.
The Council of State has also considered the division of responsibilities between the law applicable to a policy and that of the country in which the insurer is established. Referring to the Court of Cassation’s case law, it noted that a measure restricting the payment of life insurance premiums might not fully achieve its objective because the terms governing premium payments form part of the technical and financial characteristics of the policy and are therefore governed by the law of the state in which the insurer is established.
This raises the question of whether the proposed condition is compatible with European law.
Condition 2: Eligibility of Underlying Assets
The second condition would require assets denominated in units of account to have “similar characteristics” to those included in the list referred to in Article L. 131-1 of the French Insurance Code.
The meaning of “similar characteristics” will therefore be important. A restrictive interpretation could once again raise questions about the technical and financial rules governing policies issued by foreign insurers.
There is a relevant European precedent. In 2015, Belgium sought to regulate the assets eligible within life insurance policies issued by foreign insurers operating under the freedom to provide services. Belgium subsequently amended its national legislation on the grounds that the rules were not compliant with European Union law.
This precedent could support a broader interpretation of “similar characteristics”, which would potentially limit the practical impact of this condition. A more restrictive interpretation could, however, raise further questions about its compatibility with European law.
Condition 3: Personal Assets
The third condition builds on the second and concerns assets connected to the parties to the policy.
Under the draft Finance Bill, where a policy contains commitments similar to those referred to in Article L. 131-1-3 of the French Insurance Code, those commitments cannot be backed by an asset issued, guaranteed or owed by any of the persons referred to in that article. In practical terms, it would not be sufficient for an asset simply to be eligible, or to have characteristics like those permitted under the French Insurance Code. The assets held must also have no connection with the policyholder, insured person or beneficiaries.
This provision is consistent with our existing acceptance policy and reinforces an important principle regarding the legal nature of a life insurance policy.
What Happens Next?
The draft Finance Bill appears intended, in part, to prevent investment in personal assets through life insurance policies. However, the first two conditions raise broader questions about the respective jurisdiction of France and the country in which a foreign insurer is established.
Their ultimate impact will therefore depend on how the legislation develops and, importantly, how these provisions are interpreted in the context of European law.