* Swiss insurers may be next in U.S. crackdown on tax
* Insurers hold up to $10 bln of U.S. clients' untaxed money
* Specialist firms could offer insurers an escape route
By Martin de Sa'Pinto and Alice Baghdjian
ZURICH, July 4 Swiss insurers are scrambling to
defend themselves against possible investigations into billions
of dollars of untaxed assets held by their American clients.
As Switzerland continues to seek a data-transfer deal with
the United States to protect banks accused of helping U.S.
citizens to evade tax, a new cross-border law is expected to
bring the insurance sector to the attention of the authorities
Tax-deferred life policies and annuities, once beyond the
scope of U.S. tax collectors, will become subject to the U.S.
Foreign Account Tax Compliance Act through agreements with
governments across the globe. Slated for introduction in 2014,
the law will force foreign banks and other financial
institutions to tell the U.S. government about American
customers' accounts holding more than $50,000.
Insurers including Swiss Life and Vaudoise's
Valor Life are trying to ensure that American clients
who bought variable life policies and annuities can show that
they have paid taxes due to the United States, eight industry
insiders told Reuters.
"It's not the insurance policy that's a problem, it's the
fact that they didn't declare the money before," said one
Switzerland-based lawyer who advises insurance companies that
have American clients who are not tax-compliant.
A Vaudoise spokeswoman said that Valor Life had not targeted
U.S. clients and that its exposure to non-compliant
policyholders is "minimal".
Swiss Life spokeswoman Irene Fischbach said that all her
company's products comply with the relevant legal and tax laws,
adding that policyholders confirm that the assets invested meet
personal tax and legal obligations.
"Swiss Life does not want to have undeclared assets,"
Sources told Reuters in March that Swiss Life was sounding
out possible bidders for its U.S. client book, though they say
that the company now appears to have decided against a sale.
THE UBS LINK
In 2009, the year UBS admitted helping U.S.
clients to evade taxes and was forced to pay a $780 million fine
and hand over more than 4,000 client names, many insurers
enjoyed a boom in sales of tax-efficient policies to offshore
clients fleeing the bank, five industry sources told Reuters.
These sources estimate that untaxed U.S. client money with
Swiss insurers could total as much as $10 billion.
The insurers have little time to lose, said one of the
sources, whose company buys U.S. client books and undertakes the
complex process of making them compliant.
"Now the insurers can choose their own timetable, but it's
very different once legal action is pending. At the moment, a
lot of them still have their heads in the sand," he said.
The data passed by UBS helped U.S. authorities to pursue
other banks, including Switzerland's oldest bank, Wegelin, which
was indicted in January and later shut its doors for ever after
pleading guilty to the charges and paying a $58 million fine.
That same data may now be used to investigate insurers,
several sources said. U.S. tax authorities declined to comment.
"If a client moved from a long-standing bank account to an
insurance policy, that gives a strong indication that there
could be some avoidance," the Switzerland-based lawyer said.
"Those people need to get on to voluntary disclosure as soon as
Some insurers are looking to sell or close business units
that sold variable life and annuity products to U.S. clients.
Firms that specialise in making such problem assets
tax-compliant, including Bermuda-based Crown Global, may be
prepared to step in. Though these specialists would be unwilling
to pay for the assets, some insurers may jump at an escape
As one insurance-focused asset manager said: "If you're
sitting on a radioactive waste dump and an expert says he can
take it off your hands, the proposition starts to look pretty