France – Insurers to Pay Part of the Covid-19 Bill

Christophe Bourdaire
December 20, 2020

This blog was last updated on December 21, 2020

Since the Covid-19 outbreak, the insurance industry has been put under the spotlight in France, sometimes being the scapegoat for failing to compensate its insureds. Exceptional tax, insurance premiums frozen, contribution to Solidarity Funds and schemes are all examples of the measures taken. In this blog we detail the different steps taken by local authorities which impact insurers.

Health insurers to be taxed

The 2021 Social Security Budget Law introduces an exceptional tax on health insurance due by insurers. The rate is set at 2.6% for 2020 and applies on all insurance premiums subject to the Taxe de Solidarité Additionnelle (TSA), except those providing daily allowances. For 2021, the rate reduces to 1.3% but may still be amended next year when the 2022 Social Security Budget Law is discussed. The objective is to collect an additional EUR 1.5 billion of revenue. Indeed, it has been estimated that during the first lockdown in the spring of this year in France, claim payments made by health insurers dropped by more than EUR 2 billion, while spending of the national health scheme (Assurance Maladie) has significantly increased. The French government is therefore looking to reduce the deficit of its scheme by making the insurance industry contribute.

Damage insurers to be frozen

The 2021 Budget Law could have implemented a similar measure. A 2% exceptional tax due on damage insurers has been proposed during the discussion of next year’s budget but has been aborted in exchange for a freeze in insurance premium renewals in 2021. This applies to those insureds mostly impacted by the Covid-19 situation (small and medium companies). The insurance industry has accused the local government of blackmail, while the authorities argued that insurers hadn’t done enough to assist small and medium sized business and in particular cover the business interruption caused by the pandemic. Insurers will be relieved that the introduction of online filing for insurance premium tax (IPT) will not now happen in 2021. For now, unless further delayed, it’s planned for 2022.

Solidarity Fund and Catex scheme

The French insurance industry has already contributed EUR 400 million to a Solidarity Fund during the first wave of Covid-19. The objective was mainly to compensate small and medium businesses for business interruption caused by the pandemic as many contracts excluded such cover. In addition, the industry estimates that it has also paid more than EUR 2 billion to cover the business interruption suffered by its insureds due to lockdown measures.

As we see, dialogue between local authorities and insurers appears tense. But looking at the longer term, both sides seem to agree on the need to implement a scheme that could cover the pandemic risk based on a partnership approach. Some months ago, the French government asked the insurance industry to propose future solutions to cover pandemic risks. Discussions are still ongoing, but the emergence of a Catex (Extraordinary Catastrophes) scheme built on the experience of the CatNat regime and the GAREAT pool could be an approach that suits both insurers and the French authorities.

Take Action

To keep up with changes in the insurance landscape and tax compliance follow us on LinkedIn and Twitter

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Christophe Bourdaire

Senior Regulatory Specialist, Regulatory Analysis. Christophe joined Sovos FiscalReps in 2011 and has been managing the IPT compliance process for a portfolio of captives and French speaking clients. Based in France, he focuses on the development of the global IPT content and technology offering. Christophe completed a degree (certificate) in Journalism at Ecole Nouvelles in Nice, France. He is a native French speaker, and also speaks fluent Spanish.
Share this post

2025 tax filing season
North America Tax Information Reporting
November 21, 2024
Top 5 FAQs to Prepare for the 2025 Tax Filing Season

This blog was last updated on November 21, 2024 While “spooky season” may be over for most of us, the scariest time of year for many businesses is right around the corner: tax filing season. As they brace themselves for the flood of forms, regulatory updates, and tight deadlines, the fear of missing a critical […]

dtc shipping law updates
North America ShipCompliant
November 13, 2024
DtC Shipping Laws: Key Updates for Alcohol Shippers

This blog was last updated on November 13, 2024 When engaging in direct-to-consumer (DtC) shipping of alcohol, compliance with different state laws is paramount and so keeping up with law changes is critical. In 2024, the rules in several states for DtC have already been adjusted or will change soon. Here is a review of […]

sales tax vs. use taxes
North America Sales & Use Tax
November 8, 2024
Sales Tax vs. Use Tax, Explained. Who Reports What, and When?

This blog was last updated on November 19, 2024 One of the core concepts in sales tax compliance is also one of the most frequently misunderstood: the differences between sales tax and use tax. These tax types may look similar on the surface, but knowing the differences is essential for staying compliant and avoiding costly […]

2025 bond project
North America Tax Information Reporting
November 4, 2024
2025 NAIC Bond Project – The Insurer’s Guide

This blog was last updated on November 14, 2024 The regulatory landscape for insurance companies is undergoing significant changes with the Principles-Based Bond Project which is set to take effect on January 1, 2025. These changes, driven by the National Association of Insurance Commissioners (NAIC), will impact how insurance companies classify and value bond investments, […]

E-Invoicing Compliance EMEA VAT & Fiscal Reporting
November 1, 2024
VAT in the Digital Age Approved in ECOFIN

This blog was last updated on November 7, 2024 The long-awaited VAT in the Digital Age (ViDA) proposal has been approved by Member States’ Economic and Finance Ministers. On 5 November 2024, during the Economic and Financial Affairs Council (ECOFIN) meeting, Member States unanimously agreed on adopting the ViDA package. This decision marks a major […]