Reassignment and Portability of Life Policies Across Jurisdictions

Moving between countries is a defining feature of the internationally mobile life. It creates complexity in almost every area of financial planning — and life assurance is no exception. Policies taken out in one country may not function as intended in another. Cover that was adequate in one regulatory environment may be restricted or unenforceable in another. And policies taken out in an employer's name or as part of a business arrangement may need to be transferred to personal ownership when the employment or business relationship ends.

This guide addresses the portability of life assurance policies across jurisdictions and the mechanics of policy reassignment — changing who owns or benefits from a policy.

What Is Policy Portability?

A life assurance policy is said to be portable if it can continue in force when the policyholder moves to a new country, without the policy being modified, re-underwritten, or cancelled. Portability is the fundamental requirement for life cover to be useful to an internationally mobile individual.

Not all policies are portable. The key determinants of portability are:

1. Residency Clauses

Many domestic life assurance policies contain clauses that require the policyholder to be resident in the country where the policy was issued. Moving abroad may trigger:

• A notification requirement (the policyholder must inform the insurer)
• A review of the policy (the insurer may assess whether the new country of residence affects the risk)
• A restriction on cover (for example, the policy may continue but war and territorial exclusions may be applied for the new country)
• A termination of cover (in the most restrictive cases, the policy may lapse if the policyholder is no longer a qualifying resident)

A policy that has no residency clause — or that explicitly permits worldwide residence — is portable in the fundamental sense.

2. Regulatory Licensing

An insurer licensed to transact insurance business in one country may not be licensed in another. If the policyholder moves to a country where the insurer is not licensed, the insurer may be legally unable to continue servicing the policy — accepting premium payments, processing claims, or modifying the policy terms.

This issue is particularly acute for EU-resident policyholders moving to countries within the EEA (European Economic Area): freedom of services rules have historically allowed insurers licensed in one EU member state to serve clients in another without local licensing. Post-Brexit, this freedom no longer applies to UK insurers for EU policyholders, which has created complications for some policies.

For international policies issued by offshore providers (Isle of Man, Guernsey, Bermuda, Cayman Islands), the legal framework is different: these providers typically service clients globally without the country-by-country licensing structure. Their portability is structural.

3. Tax Recognition

Even where a policy continues in force after a move, its tax treatment in the new country may differ from the original country. A policy that was inside a tax-efficient wrapper in one jurisdiction may not receive equivalent treatment in another. This does not affect the policy's validity but does affect its net-of-tax value to the policyholder.

What to Do When Moving Country: A Checklist

When preparing to move to a new country, a systematic review of all existing life assurance policies is advisable. For each policy, confirm:

1. Does the policy contain a residency clause? If yes, what does it require?
2. Is the insurer licensed or does it have a presence in the destination country? Contact the insurer directly or through an adviser.
3. Will moving affect any existing coverage exclusions or ratings? A policy taken out while resident in a low-risk country may attract additional restrictions in a higher-risk environment.
4. What is the tax treatment of the policy in the destination country? Is the premium paid deductible? Is the death benefit taxable? Are there restrictions on holding foreign policies?
5. Can premiums continue to be collected from a foreign bank account? Some domestic insurers accept only local direct debits; an international bank transfer may not be processed.

If these questions cannot be answered satisfactorily, the options are:

• Seek a formal written confirmation from the insurer that cover continues unaffected
• Seek additional cover through an internationally structured policy to bridge any gap
• Surrender the existing policy (if surrender value exists) and replace with an internationally appropriate structure

Policy Reassignment: Transferring Ownership

A policy reassignment (also called an assignment or a transfer of ownership) changes who owns the policy. The most common contexts for reassignment of a life assurance policy in an international setting are:

Employer to Employee

A key person policy, relevant life plan, or group life policy held by an employer may be reassigned to the employee personally when:

• The employment relationship ends
• The employee retires
• The business is wound up or sold

Reassignment from employer to employee is typically a taxable event in the employee's hands — the market value of the policy (or its surrender value) may be treated as taxable employment income. The tax treatment depends on the jurisdiction of both the employer and the employee and on the specific nature of the policy. Professional tax advice is essential before executing a reassignment in these circumstances.

Into or Out of Trust

A policy held personally by the policyholder may be assigned into a trust (for estate planning reasons), or a policy held by a trust may be assigned back to the individual (if the trust is wound up or the trust structure changes).

Assigning a policy into trust is generally treated as a gift for inheritance tax purposes in the UK and similar jurisdictions. If the policy has a significant surrender value, the gift may be immediately chargeable. If the policy is a term assurance with no cash value, the gift is typically negligible in value and the inheritance tax implications are minimal.

Between Business Partners

On the death, departure, or retirement of a business partner or shareholder, an existing key person or shareholder protection policy may need to be reassigned. Cross-option agreements and shareholder protection arrangements typically specify the mechanism for handling the policy on a trigger event.

Between Spouses or Family Members

A policyholder may wish to assign a policy to their spouse or another family member for estate planning or asset protection reasons. The tax and legal implications depend on the jurisdiction and the relationship between the parties.

The Mechanics of Assignment

An assignment of a life assurance policy typically requires:

1. Deed of assignment: A legal document transferring ownership. For internationally issued policies, the deed should comply with the law of both the policy's jurisdiction and the jurisdiction where the parties are based.
2. Insurer notification: The insurer must be notified of the assignment and update its records to reflect the new owner. Some insurers require their own assignment form.
3. Trustee notification: If the policy is in trust, the trustees must be notified of any assignment that affects their position.
4. Legal and tax advice: The parties should take independent legal and tax advice in each relevant jurisdiction before executing the assignment.

Continuing a Foreign Policy in a New Country: Country-Specific Issues

Moving to the United States

The United States has some of the strictest rules on foreign life assurance policies. US persons (citizens and permanent residents) face significant restrictions on holding foreign life insurance, including:

• Requirement to report foreign financial accounts exceeding threshold values (FBAR — FinCEN Form 114)
• Foreign Policy as a PFIC (Passive Foreign Investment Company) if it has a cash value
• Potential income and excise tax implications under the Internal Revenue Code

Moving to the US with an existing international life assurance policy requires immediate specialist US tax advice. The consequences of non-compliance with US reporting requirements are severe.

Moving to EU Member States

Following Brexit, UK life assurance providers lost the ability to continue servicing policies for EU residents via freedom of services. Some policies held by UK policyholders who moved to EU countries have required restructuring. The position depends on the specific insurer, the EU member state, and the post-Brexit arrangement (if any) between the UK and that country.

International providers domiciled in EEA jurisdictions (Luxembourg, Ireland) or in Isle of Man/Guernsey (which have separate relationships with EU member states) are typically less affected.

Moving to Gulf States

The UAE, Saudi Arabia, Qatar, and other Gulf states do not impose personal income tax, and the regulatory environment for offshore policies is generally permissive. International life assurance policies typically continue without material disruption on relocation to the Gulf. However, the UAE's insurance regulatory framework (Insurance Authority, now consolidated into the Central Bank) has requirements for locally issued policies; offshore policies from established international providers typically sit outside these local requirements.

What Happens If You Cannot Maintain Portability?

If an existing policy cannot continue due to regulatory, residency, or licensing restrictions, the options are:

• Surrender the policy and replace it with one appropriate for the new jurisdiction (bearing in mind that surrender values in early years are typically lower than total premiums paid, and replacement requires new underwriting)
• Maintain the policy without updates — a valid but unsatisfactory option that means the sum assured becomes fixed (no further contributions, no modifications) but existing cover remains
• Transfer to a new structure — where the policy terms and applicable law allow, restructuring into a more portable vehicle

None of these options is ideal. The best outcome is achieved by selecting an internationally appropriate policy at outset, before the first international move.

How Global Investments Can Help

Global Investments advises internationally mobile clients on the portability of their existing protection arrangements before and after a move. We identify residency clause risks, licensing gaps, and tax treatment changes in advance, and where replacement or restructuring is necessary, we coordinate the transition.

For clients reassigning policies — particularly from employer to employee or into trust — we ensure that the tax and legal steps are sequenced correctly and that the resulting arrangement is robust.

This guide is for information only. Policy portability and reassignment rules vary by insurer, policy type, and jurisdiction. Tax treatment of assignments depends on your personal circumstances and applicable law. Seek regulated financial and legal advice before taking any action.