Blockchain: The $5 billion opportunity for reinsurers

Reinsurance industry could save $5 billion with blockchain

Reinsurers are in line to build some of the biggest blockchain applications outside the payments sector with the potential to save $5-10 billion in costs, says a new report from PwC.

PwC’s report shows that blockchain has huge potential to transform the reinsurance industry, given the amount of data flowing between clients, brokers, reinsurers and outsource service providers. PwC estimates that, by simplifying reconciliation and multiple data entries, blockchain solutions could remove 15-20% of expenses from the reinsurance industry, delivering $5-10 billion of savings.

The report shows that blockchain technology can speed up claims processing verification. It can also allow primary insurers to cede/ retrocede risk using an application specifically designed to process treaties, notify all parties and process premium and commission payments.

Potential wins from blockchain in reinsurance:

  • Processing – using blockchain to remove task duplication and multiple rekeying of data
  • New business – the industry has already seen pilots in the catastrophe swap market and PwC expects blockchain to support entry into new markets and products
  • Transparency – if all underlying risks are on a blockchain, the reinsurer can more accurately identify and quantify the risks that are to be protected by reinsurance. Effectively information on the underlying risks can be aggregated onto a reinsurance blockchain so all information, documents and transactions flow into the contract.PwC has been working on a number of proof of concept applications to demonstrate the potential for blockchain within insurance and reinsurance and how the technology could be applied in practice. We believe it’s important to show that blockchain applications not only work but provide the right solutions to important business problems.

Stephen O’Hearn, PwC’s global insurance leader, commented:
“Blockchain technology is still a new and uncertain area for reinsurers but those who are able to quickly build, assess and refine their applications will differentiate themselves. At a time when companies are searching for cost savings, the potential of blockchain to vastly improve efficiency and accuracy cannot be ignored.”

Download the full Report here.

The European Commission has launched a “European TIN Portal”

The European Commission has recently launched the so called European TIN Portal, a website which provides information concerning the structure and specificities of TINs of European Member states, if the Member State in question has chosen to publish this information.

Interestingly, one can also find examples of official documents, showing where the TIN is located on the respective document. There is further a search/check tool which enables stakeholders to check the TIN syntax and/or structure.

SwissBanking information on termination of Final Withholding Tax Agreements and EU Savings Directive

On September 9, 2016, SwissBanking has published a new circular (circular No. 7902) which provides new information concerning the termination of the withholding tax agreements with the UK and Austria and the change from the EU Savings Directive towards the AEOI.

In our opinion, it is important to deal with the questions discussed in the circular and particularly with respect to the UK tax year and the RnD confirmation as soon as possible.

Beyond automated advice: How FinTech is shaping asset management

Global FinTech Survey 2016

Asset and wealth managers should watch FinTech companies closely and adopt a responsive digital strategy. Otherwise, they face losing part of their business to new entrants.

After leading the way with technology in the 1980s, asset and wealth managers (AWMs) have become dismissive of technology innovations and disruptions to their industry. During the emergence of online brokerages, wire houses gave the upstarts pejorative titles, such as “discount brokers”, holding the belief that these new business models would fail to take off, and the risk they posed to businesses was low.

In reality, these new competitors commoditised trade execution, significantly dropping the price that companies can charge per trade. Eventually, they introduced new pricing models by splitting advice from transactions – full service brokers started to charge on a fee per assset under management (AuM) basis versus fees per trade.

History could repeat itself again with the ongoing disruption caused by FinTech companies. Much like online brokerages, “roboadvisors” have been disparaged as less valuable than human professional wealth advisors, and so far have been focusing mainly on low balance accounts. But the innovations under the umbrella of “robo-advisors” are becoming more sophisticated and, thus, enable advisors to service higher net worth accounts. In fact, “robo-advisors” create an opportunity for asset managers to target the mass affluent who are looking for cheaper alternatives to receive advice on how to manage their assets.

Capture_Study

Participants in PwC’s global FinTech survey view asset and wealth management (AWM) as the third most likely field to be disrupted (35%), while 60% of asset and wealth managers think that at least part of their business is at risk to FinTech – lower than most other financial sectors.

By being too complacent, investing mainly in self-serving automation and ignoring the imminent technological revolution, asset and wealth managers might lose touch with their core clients. Additionally, they might miss the opportunity, already tapped by FinTechs, to win the mass affluent market. Keeping abreast with how FinTech is reshaping the industry seems like the most reasonable way Forward.

Read the full report here.

Changes on Swiss Withholding Tax Act approved by Federal Assembly

On 20 September 2016, the Swiss Council of States approved an amendment of the Swiss Withholding Tax Act. As a result, the notification procedure for withholding tax on dividend distributions shall – even in case the 30-days-filing-deadline is not met – be granted by the Swiss Tax Authorities, if the relevant conditions for the notification procedure are fulfilled.

The Council of States also accepted a transition rule, which was proposed by the National Council in the amended Swiss Withholding Tax Act. Based on this transition rule, the amended law shall also be applicable for cases which occurred prior to the enactment of the law changes, unless (i) the tax liability or the late payment interest is/are time-barred (“verjährt”) or (ii) was/were already finally assessed prior to 1 January 2011.

As a consequence, taxpayers who had to pay late payment interest due to missing the 30-days-deadline for filing the notification procedure, may in principle retroactively claim back respective late payment interest. After the (potential) enforcement of the new law, the taxpayer will have to make an official request in this regard within one year.

On 22 September 2016, the National Council has settled a last difference in respect of the penal provisions. The provisions agreed by both chambers do now foresee that missing the 30-days-filing-deadline may lead to an administrative fine of up to CHF 5’000.

In a last step, the revision of the Swiss Withholding Tax Act has to be adopted by the final vote of both chambers of the Swiss parliament, which is scheduled for 30 September 2016. In case no referendum is levied (a 100 days-deadline applies), the Federal Council (Swiss government) will – presumably by mid/end January 2017 – determine the exact date of entry into force.

History

Dividend distributions of Swiss companies are subject to Swiss withholding tax levied at a rate of 35%. For distributions to qualifying parent companies, it is under certain conditions possible for the paying company to apply for a notification procedure, whereas the necessary forms need to be filed within 30 days of the due date of such dividend.

In 2011, the Swiss Supreme Court decided that the 30-days-deadline in order to apply for the notification procedure is a non-extendable deadline, whereas missing this deadline leads to the forfeiture of the notification procedure even if all other conditions would otherwise be met.

The Swiss federal tax administration had thereafter consequently levied Swiss withholding tax in case of a missed notification deadline with the effect that late payment interest is due as of the original due date of the withholding tax (interest rate of 5%). Several court cases in this respect are currently pending.

Next Steps/Call to Action

On 30 September 2016, both chambers of the Swiss parliament are scheduled to confirm in a final vote the revision of the Swiss Withholding Tax Act. In case no referendum will be called, the Federal Counsel will determine the date of entry in to force of the amended Law at the beginning of next year.

The current implications of a missed deadline clearly show the importance of complying with tax compliance requirements.

Although in future the missing of the 30-days-filing-deadline should no longer lead to late payment interest, compliance with all filing obligations will remain of high importance.

We will inform you on further developments in this regard and if potential next steps need to be considered.

 

Stefan Schmid
Partner
Tax & Legal Services
stefan.schmid@ch.pwc.com
Dr. Remo Küttel
Partner
Tax Services
remo.kuettel@ch.pwc.com
Dr. Sarah Dahinden
Senior Manager
Tax & Legal Services
sarah.dahinden@ch.pwc.com

Breaking through: How insurers can harness the diversity dividend

Realising the power and potential of a changing workforce

Management wants greater diversity. Clients and employees expect it. But while progress is being made, there’s still a big gulf between management’s intentions and the reality for many people working within insurance.

In this round-up of our research and viewpoints on diversity and inclusion in the insurance industry, we outline why diversity in all its forms – from gender, generation, ethnicity, sexuality and disability to people with a broader range of skills, experiences and cultural backgrounds – can give your business an edge. We also look at how far the industry has come and how to break though the remaining barriers.

Our perspectives draw on our wide ranging work with insurance clients and support for groups campaigning for greater diversity and inclusion. We also draw on our own experience of seeking to make diversity a reality within our Organisation.

Download the full research here.

European Commission opens formal State aid investigation into Luxembourg’s tax treatment of GDF Suez (now Engie)

On September 19, 2016 the European Commission (EC) announced that it has opened a formal State aid investigation into tax rulings granted by the Luxembourg tax authorities to GDF Suez group (now Engie).

The EC will investigate the treatment of certain financing transactions between four Luxembourg group subsidiaries. These financial transactions are loans that can be converted into equity and bear zero interest for the lender.

According to the EC’s press release the EC considers that the tax treatment applied to those transactions could represent State Aid, primarily because it qualifies the same financial transaction both as equity and as debt, giving rise to double non-taxation.

The entire opening decision, which is not yet published, represents only the EC’s preliminary assessment in this matter. Based on other investigations, it can be expected that the final decision will take several months.

The press release also includes a summary of the key three categories into which the EC’s recent investigations can be generally classified.

Read more in the newsletter from our EUDTG network and the press release:

PwC EUDTG Newsalert 

EU Commission press release

Secure your participation for PwC’s Stay Smart – Financial Reporting Autumn 2016

sliderA_Stay_Smart_EN_980x400_redWe are proud to announce the next Stay Smart event:
“Financial Reporting Autumn 2016”.

Our seminar on IFRS and other important accounting and reporting issues is the ideal way to continue your professional education! Save the date and register for your preferred date already today:

Geneva 09.11.2016 (morning and afternoon)
Basel 10.11.2016 (morning)
Bern 18.11.2016 (morning)
Lugano 22.11.2016 (morning)
Lucerne 23.11.2016 (morning)
Zurich 29.11.2016 (morning and afternoon)

Interested? Sign up today here. We will confirm your registration and reserve a place for you. Details of the programme will be announced soon.

As usual, you are invited to discuss the topics with specialists from PwC’s technical department before, during or after the event. Keep yourself up to speed! We look forward to welcoming you.

Italy expands its ‘white list’

Italy-witelistJPGIn brief
Italy has released a new ‘white list’ — jurisdictions that provide for an adequate exchange of tax information with Italy. The list includes countries and territories, such as the Cayman Islands, Bermuda, Jersey, Guernsey, that previously lacked access to several favorable domestic Italian tax regimes, such as certain withholding and capital gain exemptions.

Broadening the white list allows Italian-resident taxpayers to benefit from certain domestic tax provisions, such as the notional interest deduction (NID) on equity contributions received from persons established in those countries.

The new Italian white list is expected to take effect on September 6, 2016, the 15th day following the date that it was published in the Italian Official Gazette. We expect the Italian tax authorities to further clarify the new white list’s effectiveness.

Read how this might affect your business in our current newsletter.

If you have questions, please contact your usual PwC contact person or one of PwC Switzerland´s international  tax experts named below.

Armin Marti
Partner
armin.marti@ch.pwc.com
Stefan Schmid
Partner
stefan.schmid@ch.pwc.com
Louis Macchi
Partner
louis.macchi@ch.pwc.com

Recording of working time – what applies and what has changed?

 

RecordingOfWorkTimeGeneral information
According to the Swiss Employment Act (“EmpA”) and its Ordinance 1, employers are obliged to keep all employee records. This also covers the employer’s obligation to track the working time of each employee, provided that the employer and employee are subject to the EmpA. There are only very few exceptions to the applicability of the EmpA, however.

The employer also has the possibility to delegate this obligation to its employees, although the ultimate responsibility remains with the employer. In this case, each employee has to record not only the duration of their individual daily and weekly working time, but also the start and end time of work, as well as the start and end time and duration of all breaks exceeding 30 minutes.

It is at the discretion of the employer to decide on the way working time is recorded, provided that the selected method is clear and understandable (e.g. software-based recording, apps).

Read what is going to change in detail in our current newsletter.

If you have questions, please contact your usual PwC contact person or one of PwC Switzerland´s legal experts named below.

Martin Zeier
Legal Services
martin.zeier@ch.pwc.com
Myriam Büchi
Legal Services
myriam.buechi-baentli@ch.pwc.com
Christine Bassanello
Legal Services
christine.bassanello@ch.pwc.com