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Insurance
Sector

Transfer Pricing in the Insurance Sector.

Insurance, essential for financial stability, offers protection against financial loss through – mainly – life, health, and liability coverage, but faces challenges such as pricing pressures, demand for improved customer service, and the need for innovative solutions. Disruptive technologies and Insurtech are altering traditional models, bringing forth a need for digital adaptation and giving rise to new transfer pricing challenges. 

TPS offers an extensive, probed expertise in the main transfer pricing issues in the Insurance industry:

  • Reinsurance Transactions: we assist with the definition and suppor of the conditions of the reinsurance coverage when risk is spread or mitigated between entities of the group, including the retrocession of risks and participation in profits of the ceded portfolio. Different types of reinsurance transactions may be employed, such as Proportional Reinsurance or Excess of Loss (XoL).
  • Transfer pricing support related to Investment Activities: The group might manage its investments through a group-affiliated asset management firm and conditions need to be assessed, defined or implemented correctly through jurisdictions.
  • Asset-Liability Management: The asset-liability management of an insurance company may be conducted in collaboration with other financial institutions within the same group to optimize financial stability by duration matching and liquidity risk management.
  • Commission Payments: we provide the necessary analyses for the definition and defense of the commissions paid to agents and brokers for selling or promoting the group’s insurance products.
  • Service Agreements: We can assess if the service level agreements (SLAs) for the intragroup services (like IT, HR, or administrative services) offer arm’s length conditions to the insurance companies and propose alternatives or improvements.
  • Loans and Capital Transactions: Insurance companies may engage in intercompany loan transactions, or capital injections with other entities within the same financial group to manage liquidity or capital requirements.
  • Regulatory Compliance: when compliance monitoring and regulatory reporting activities are centralized and managed by a specific entity within the financial group on behalf of the insurance company, the conditions must follow transfer pricing requirements in each jurisdiction and TPS can assist in establishing and implementing coordinated policies.

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Should you wish to discuss further, please contact
our insurance sector transfer pricing experts

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