New Terrorism Compensation Scheme Introduced in Denmark

Joseph Finbow
April 25, 2019

The Danish government has introduced new law creating a state-owned insurance scheme for compensation for losses arising from a terrorist attack using chemical, biological, nuclear and radioactive (CBNR) weapons. The scheme comes into effect on 1 July 2019. There had been concerns that CBNR terror coverage available in the market was limited and, as it is not a mandatory cover, many insurers were considering whether to continue to offer it at all.

In basic terms, under the new scheme, the financial risk of a CBNR attack in Denmark will initially be borne by the State, but those costs are subsequently recovered from policyholders. It is the way those amounts are recovered, however, which will be of interest to tax managers. Following a CBNR attack and the State paying claims, a 5% levy will be applied to policies covering fire risks in relation to buildings, land, moveable property, railway vehicles, motor vehicles and ships.

Insurers will be required to collect the additional amount from their policyholders along with the first premium of the next calendar year. This will then be remitted in to a fund on a quarterly basis until the cost of the claims are fully recovered by the State, at which point the contributions will cease and any excess amounts held by the fund will be refunded to policyholders proportionally.

This way of funding terrorism cover is a less common approach. Additional (re)insurance pools, such as Pool Re in the UK or ongoing charges including the Victim of Terrorism Contributions to the Fonds de Garantie in France, are more frequently used forms of funding.

This ‘after the event’ method of collection means that hopefully the levy will never need to be collected. However, insurers writing risks in Denmark should be aware of their potential obligations under the new law.

Take Action

To read more about the insurance landscape, download Trends: Insurance Premium Tax and 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

Joseph Finbow

Joseph is a Chartered Accountant with over 10 years’ experience in dealing with global insurance premium tax issues. He has been with Sovos FiscalReps for over 7 years where he has been responsible for the delivery of insurance tax compliance services for Sovos FiscalReps’ captive insurance and P&I club clients for much of that time. He is now a Director of Regulatory Analysis, responsible for the insurance tax information in Sovos IPT.
Share this post

EMEA IPT
March 7, 2024
Taxation of Motor Insurance Policies: Norway

Norway has an indirect tax that applies to elements of coverage under a motor insurance policy. This blog details everything you need to know about it. As with our dedicated Spain IPT overview, this blog will focus on the specifics in Norway. We also have a blog covering the taxation of motor insurance policies across […]

EMEA IPT
February 13, 2024
Liechtenstein IPT: An Overview

Liechtenstein is one of many countries with Insurance Premium Tax (IPT) requirements, specifically the Swiss Stamp Duty and Liechtenstein Insurance Levy. This blog provides an overview of IPT in Liechtenstein to help insurance companies remain compliant.   What kind of taxes are applicable in Liechtenstein on insurance premium amounts? In Liechtenstein, there are two types […]

EMEA IPT
December 7, 2023
Monaco Insurance Premium Tax: An Overview

Monaco is one of many countries with Insurance Premium Tax (IPT) requirements, specifically the Special Annual Tax and Fire Brigade Tax. This blog provides an overview of IPT in Monaco to help insurance companies remain compliant.   What kind of taxes are applicable in Monaco on insurance premium amounts? In Monaco, there are two types […]

IPT Spain
November 29, 2023
Taxation of Motor Insurance Policies: Spain

There is a wide variety of indirect taxes and parafiscal charges that apply to the different elements of coverage that can be included under a motor insurance policy in Spain. You can read our blog to learn more about taxation of motor insurance policies in Europe, this blog focuses on some of the specifics to […]

EMEA VAT & Fiscal Reporting
November 23, 2023
6 Possible Pitfalls in the Pursuit of VAT Compliance

The convergence of traditional Value Added Tax (VAT) and transactional compliance regimes is creating new obligations and responsibilities for companies doing business around the world. When it comes to VAT, compliance is so much more than just reporting. Here are six pitfalls you should avoid in the pursuit of VAT compliance:   1. Making the […]