Encyclopedia of Private International Law
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Encyclopedia of Private International Law

Edited by Jürgen Basedow, Giesela Rühl, Franco Ferrari and Pedro de Miguel Asensio

The role and character of Private International Law has changed tremendously over the past decades. With the steady increase of global and regional inter-connectedness the practical significance of the discipline has grown. Equally, so has the number of legislative activities on the national, international and, most importantly, the European level. With a world-class editor team, 500 content items and authorship from almost 200 of the world’s foremost scholars, the Encyclopedia of Private International Law is the definitive reference work in the field. 57 different countries are represented by authors who shed light on the current state of Private International Law around the globe, providing unique insights into the discipline and how it is affected by globalization and increased regional integration. The Encyclopedia consists of three inter-linked pillars, enhanced by sophisticated search and cross-linking functionality. The first pillar consists of A-Z coverage of the scope and substance of Private International Law in the form of 247 entries. The second pillar comprises detailed overviews of the Private International Law regimes of 80 countries. The third pillar presents valuable, and often unique, English language translations of the national codifications and Private International Law provisions of those countries. This invaluable combination represents a powerful research tool and an indispensable reference resource.
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Chapter L.10: Life insurance contracts

Jan D Lüttringhaus

I. Development of the private international law of life insurance

1. From the Middle Ages to the 20th century

The roots of life insurance as well as of private international law (see →Aldricus) both lie in medieval Northern Italy: it was in the Mediterranean marine commerce dominated by the sea-power of Upper Italian cities that the predecessors of premium-based life insurance policies developed. Although some of these contracts involved cross-border scenarios (cf Enrico Bensa, Il Contratto di Assicurazione nel Medio Evo (Tipografia Maritima Editrice 1884) 128 ff), private international law issues did not arise until actuarial science laid the ground for the triumphant course of modern-life insurance business. Frequently, the need to purchase life insurance abroad stemmed from the prevalent prohibition of these contracts in many European countries due to religious or moral reservations (cf Ordonnance de la Marine, Du mois d’Août 1681, vol 3 (Paris) ch VI art 10: ‘Défendons de faire aucune assurance sur la vie des personnes’). The situation was different in England, where life insurance business had been thriving early on. In light of this, continental Europeans willing to take out life insurance policies had to contract across borders. However, given the lack of choice-of-law rules, transnational life insurance policies often proved hard to enforce. This eventually spurred the development of life insurance companies on the Continent: in Germany, for example, the Gothaer was founded in 1827 in part as a reaction to the inadequacies of cross-border life insurance (cf Peter Koch, Geschichte der Versicherungswirtschaft in Deutschland (VVW 2012) 68). Although especially English insurers continued their international business (cf eg German Imperial Court of Justice (RG), 8 February 1889 [1889] 22 RGZ 215), cross-border life insurance contracts did not reach a considerable scale until these products were included in the European Single Market.

2. European Common Market for life insurance

The Common Market for life insurance was created by aligning the regulatory environment for insurers as well as by harmonizing European private international law rules: the Third Life Assurance Directive (Council Directive 92/96/EEC of 10 November 1992 on the coordination of laws, regulations and administrative provisions relating to direct life assurance and amending Directives 79/267/EEC and 90/619/EEC, [1992] OJ L 360/1) introduced the single licence principle allowing life insurers from Member States of the EU or the EEA to serve the entire Common Market without approval by any other supervisory authority except from their home country regulator (see eg Jürgen Basedow, ‘Internal Market (Insurance)’ in Jürgen Basedow and others (eds), The Max Planck Encyclopedia of European Private Law, vol 1 (OUP 2012) 955 ff). While this allowed insurers to enjoy the freedom to provide services and freedom of establishment, the transnational life insurance business also needed reliable private international law rules. Special European provisions on jurisdiction were introduced with the Brussels Convention (Brussels Convention of 27 September 1968 on p. 1152jurisdiction and the enforcement of judgments in civil and commercial matters, [1972] OJ L 299/32, consolidated version, [1998] OJ C 27/1), the predecessor of the Brussels I Regulation (recast) (Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), [2012] OJ L 351/1) (→Brussels I (Convention and Regulation)). The first European provisions on →choice of law relevant for →insurance contracts were contained in the Rome Convention (Rome Convention on the law applicable to contractual obligations (consolidated version), [1998] OJ C 27/34). The scope of application of these provisions was, however, limited to insurance contracts covering risks situated outside the EU/EEA. Intra-EU/EEA risks were subject to the choice-of-law rules of the Second Life Assurance Directive (Council Directive 90/619/EEC of 8 November 1990 on the coordination of laws, regulations and administrative provisions relating to direct life assurance, laying down provisions to facilitate the effective exercise of freedom to provide services and amending Directive 79/267/EEC, [1990] OJ L 330/50). This Directive was replaced by the Fourth Life Assurance Directive (Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance, [2002] OJ L 345/1), which in turn will merge into the Solvency II Directive in 2016 (Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), [2009] OJ L 335/1, as amended).

From the beginning, these choice-of-law rules were criticized as both too complicated and too incoherent. In 2008, the European legislator introduced the Rome I Regulation (Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), [2008] OJ L 177/6; →Rome Convention and Rome I Regulation (contractual obligations)) which contains a provision on insurance contracts in art 7 and which supersedes the choice-of-law rules of the aforementioned European Directives and the Rome Convention. However, the Rome I Regulation has inherited many of the flaws already identified in the preceding choice-of-law regime. And it is also due to this unsatisfactory status quo of EU private international law in the field of insurance that cross-border life insurance business prospers only in certain niches: for example, most variable annuity contracts are currently being marketed from →Ireland and →Luxembourg given the favourable regulatory environment in these countries. However, the same may not be said with regard to standard life insurance policies.

II. Life insurance contracts under the Rome I Regulation

1. General outline

While European choice-of-law rules for insurance contracts have been consolidated in the Rome I Regulation, it still maintains a cumbersome fragmentation of the applicable rules (→Insurance contracts). Whereas ‘large risks’ are subject to the choice-of-law regime in art 7(2) regardless of their location, the rules applicable to ‘mass risks’ under the Rome I Regulation vary: art 7(3) only concerns policies covering risks situated inside the EU. Insurance contracts relating to risks located outside the EU are subject to the general choice-of-law provisions, ie arts 3, 4, 6 and the rules applicable by virtue of art 23 Rome I Regulation.

It is hence of fundamental importance that art 7(1), (2) Rome I Regulation effectively determines that life insurance may never be deemed as covering a ‘large risk’ since this term is defined by reference to art 5(d) Dir 73/239 (First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, [1973] OJ L 228/3) and that instrument in accord with its language applies only to ‘direct insurance other than life assurance’. By consequence, even experienced economic players such as multinational corporations contracting group life insurance for their employees may never benefit from the more liberal art 7(2) Rome I Regulation. Since life insurance contracts are invariably treated as ‘mass risks’, art 7(3)(1) Rome I Regulation imposes severe restrictions on →party autonomy in respect to these policies. At the same time, however, art 7(3)(2) Rome I Regulation allows for an expansion of choice-of-law options by virtue of national private international law and therefore openly compromises the Regulation’s intention of providing a uniform set of choice-of-law rules in the EU. Finally, where a (group) life insurance p. 1153contract covers risks situated in more than one Member State or risks inside as well as outside the EU, the contract shall be considered as constituting several contracts each relating to only one state (cf art 7(5) Rome I Regulation). This may lead to a fragmentation of a single contract, whereby different laws apply to the risks depending on their location (see eg Louise Merrett, ‘Choice of Law in Insurance Contracts under the Rome I Regulation’ (2009) 5 J Priv Int L 49, 54 ff).

2. Limitations of the scope of application in the context of life insurance

Among other exemptions, eg relating to pre-contractual obligations (see art 1(2)(i)), art 1(2)(j) Rome I Regulation also contains a carve-out provision covering certain life insurance contracts in the context of occupational pensions and similar benefits. This exception is narrowly tailored since it affects solely insurance contracts arising out of operations carried out by insurers other than those mentioned in art 2 Fourth Life Assurance Directive. The carve-out in art 1(2)(j) therefore only excludes life insurance policies that satisfy two requirements: first, these contracts must be entered into with an insurance company not established in the EU, and, second, the object of the life insurance contract at hand must be to provide benefits for employed or self-employed persons in the event of death or survival or of discontinuance or curtailment of activity, or of sickness related to work or accidents at work. Given that European insurance regulations oblige insurers from third countries to underwrite their EU/EEA life insurance business through a European branch, art 1(2)(j) Rome I Regulation applies to life insurance contracts covering risks situated outside the EU/EEA (see eg Jan D Lüttringhaus, ‘Art. 1’ in Franco Ferrari (ed), Rome I Regulation (Sellier 2014) paras 90 ff; Christian Heinze, ‘Insurance Contracts under the Rome I Regulation’ [2009] NIPR 445, 446; Stefan Perner, ‘Das Internationale Versicherungsvertragsrecht nach Rom I’ [2009] IPRax 218, 219). It is moreover important to note that art 7 Rome I Regulation applies only to direct insurance. Reinsurance contracts relating to life insurance policies are subject to the general choice-of-law regime in art 3 and art 4 (→Reinsurance contracts).

3. Location of risk as key concept

The location of risk is a key concept under the Rome I Regulation since it defines which choice-of-law regime is applicable. With regard to life insurance contracts, art 7(6) Rome I Regulation draws upon art 1(1)(g) Fourth Life Assurance Directive (art 13(14)(a) Solvency II Directive), which locates the risk in the Member State where the policyholder has his/her habitual residence. This rule is modified by art 19(1) Rome I Regulation in view of a natural person acting in the course of his/her business activity: the habitual residence and hence the risk is located at his/her principal place of business provided that the life insurance contract is linked to the business activity.

If the policyholder is a legal person, art 1(1)(g) Fourth Life Assurance Directive (art 13(14)(a) Solvency II Directive) points to the Member State where the entity’s establishment, to which the contract relates, is situated (cf Case C-191/99 Kvaerner plc v Staatssecretaris van Financien [2001] ECR I-4447, para 47). The term ‘legal person’ also includes entities that do not dispose of a legal personality (see Jürgen Basedow and Wolfgang Drasch, ‘Das neue Internationale Versicherungsvertragsrecht’ [1991] NJW 785, 788). Pursuant to art 7(5) Rome I Regulation, life insurance contracts covering risks relating to branches of a legal person in different Member States shall be considered as constituting several contracts each relating to only one Member State. By consequence, different laws will apply to the respective risks covered by the life insurance policy. The term ‘place of establishment’ referred to in art 1(1)(g) Fourth Life Assurance Directive (art 13(14)(a) Solvency II Directive) is defined in art 1(1)(c) Fourth Life Assurance Directive as the head office, an agency or a branch of an undertaking. The latter terms should be interpreted consistently with ECJ case-law on jurisdiction: here the terms imply a place of business which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties (cf with regard to art 5(5) Brussels I Regulation (Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, [2001] OJ L 12/1; →Brussels I (Convention and Regulation)) eg Case 14/76 De Bloos v Bouyer [1976] ECR 1497, paras 19 ff and Case 218/86 SAR Schotte GmbH p. 1154v Parfums Rothschild SARL [1987] ECR 4905, para 10). Insurance subsidiaries will usually satisfy these requirements (cf Case C-191/99 Kvaerner [2001] ECR I-4447, paras 43 ff). For the purpose of art 7 Rome I Regulation, risks which may not be attributed to a specific subsidiary or which affect the company in its entirety should be located at the head office of the legal person. Since EU private international law only focuses on the policyholder, whereas the situation of the insured as well as of the beneficiary of the life insurance policy is immaterial, group life insurance which is, for instance, taken out by a company for its employees may therefore usually be subjected to a single law.

Finally, art 7(1) and art 1(4) Rome I Regulation refer only to risks situated inside the EU without addressing risks located in EEA Member States. This raises the question whether or not a different treatment of life insurance coverage of risks in EEA States was indeed intended. If so, this would eventually lead to an unjustifiable discrimination of policyholders from EEA Member States on grounds of their nationality, although such different treatment is expressly prohibited by art 4 EEA Agreement (Helmut Heiss, ‘Versicherungsverträge in “Rom I”: Neuerliches Versagen des europäischen Gesetzgebers’ in Dietmar Baetge, Jan von Hein and Michael von Hinden (eds), Festschrift für Jan Kropholler zum 70. Geburtstag (Mohr Siebeck 2008) 459, 462 ff). Therefore, art 7 Rome I Regulation should be applied at least by analogy to risks located in EEA Member States. This extensive reading of the provision is also supported by EU law: art 178 Solvency II Directive obliges all EEA Member States to apply the choice-of-law rules contained in art 7 Rome I Regulation. This underlines that the European legislator intends to establish a uniform choice-of-law regime that does not distinguish between risks located in EU or EEA Member States (Jan D Lüttringhaus, 'Art. 7 Rom I-VO Versicherungsverträge' in beck-online.GROSSKOMMENTAR (CH Beck 2016) para 51).

III. Law applicable to risks situated inside the EU/EEA: art 7 Rome I Regulation

Given that the European legislator decided to exclude life insurance contracts from the category of ‘large risks’ and hence the more liberal choice-of-law regime in art 7(2) Rome I Regulation, these policies are subject to art 7(3) Rome I Regulation which constrains party autonomy considerably.

1. Limited party autonomy under art 7(3) Rome I Regulation

Article 7(3) limits the laws that the parties to a life insurance contract may choose in accordance with art 3 Rome I Regulation to: (i) the law of the Member State where the risk is situated at the time of conclusion of the contract, (ii) the law of the country where the policyholder has his habitual residence and (iii) the law of the Member State of which the policyholder is a national (Jan D Lüttringhaus, 'Art. 7 Rom I-VO Versicherungsverträge' in beck-online.GROSSKOMMENTAR (CH Beck 2016) paras 106 et seq). As regards life insurance, art 7(3)(a) and (b) will always lead to the application of the same law, given that art 7(6) Rome I Regulation locates the risk at the habitual residence of the policyholder anyway. Yet, it is noteworthy that art 7(3)(b) Rome I Regulation expressly refers to the ‘country’ and not the ‘Member State’ of residence. Whereas this wording may therefore generally include third countries, the case is different with regard to life insurance: since the risk would automatically be located at the habitual residence outside the EU/EEA, the special rules for insurance contracts in art 7 are inapplicable according to art 7(1) and art 7(6) Rome I Regulation. Instead, the choice-of-law provisions in arts 3, 4, 6, 23 Rome I Regulation apply. Under art 7(3), the parties’ choice is therefore de facto limited to the law of the Member State where the risk is situated (art 7(3)(a), (b)) or of which the policyholder is a national (art 7(3)(c) Rome I Regulation).

Article 7(3)(d) and (e) offer further choices which are, however, confined to special scenarios: art 7(3)(d) Rome I Regulation applies only if an insurance contract covers risks which are exclusively limited to events occurring in a Member State other than the Member State where the risk is situated. With regard to life insurance, this provision may become relevant in the context of travel insurance, ie life insurance coverage that relates only to the travel destination but not to the Member State where the policyholder has his habitual residence. Finally, where the policyholder pursues a commercial activity or a liberal profession and the insurance contract covers two or more risks which relate to those activities and which are situated in different Member States, art 7(3)(e) Rome I Regulation allows the parties to subject the contract in its entirety to the law of any of the Member States concerned or to the law of the country of habitual residence of the policyholder.

2. p. 1155National rules expanding party autonomy: art 7(3)(2) Rome I Regulation

The limited choice-of-law options provided for in art 7(3) may, however, be expanded. Whenever in the alternatives set out in art 7(3)(a), (b) and (e) the national private international law rules of the Member States grant greater freedom of choice, the parties may take advantage of that freedom pursuant to art 7(3)(2) Rome I Regulation. Among the Member States having made use of this rule figure, for example, the →United Kingdom (cf Regulation 4 Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2009, SI 2009/3075), Italy (cf art 181 Codice delle assicurazioni, as amended by Gaz. Uff. 13 October 2005, No 239, Suppl. Ordinario No 163) and Austria (cf s 35a Austrian Federal Code on Private International Law (Bundesgesetz über das internationale Privatrecht of 15 June 1978, BGBl. No 304/1978)). By contrast, other Member States such as Germany did not exercise the option to grant greater party autonomy under their national choice-of-law rules. Overall, art 7(3)(2) Rome I Regulation reflects but a compromise since the Member States were unable to find common ground with regard to the extent of party autonomy appropriate for insurance contracts covering mass risks. It is important to note that the possibility to apply national provisions instead of the uniform rules of the Rome I Regulation counteracts the very aim of European private international law and adds further complexity to the already thorny choice-of-law regime for insurance contracts.

3. Law applicable in the absence of choice: art 7(3)(3) Rome I Regulation

In the absence of a choice of law by the parties to a life insurance contract, art 7(3)(3) Rome I Regulation points to the law of the Member State in which the risk is situated at the time of conclusion of the contract. Since the risk covered by an insurance policy is usually located at the habitual residence of the policyholder (see art 7(6) Rome I, art 1(1)(g) Fourth Life Assurance Directive and art 13(14) Solvency II Directive; see as to the relevance of art 19(1) Rome I supra II.3.), the contract will be governed by this law. As regards insurance policies taken out by legal persons, the law of the country applies where the entity’s establishment, to which the contract relates, is situated (cf art 1(1)(g) and (c) Fourth Life Assurance Directive; art 13(14)(a) Solvency II Directive; see as to the details supra II.3.).

The wording of art 7(3)(3) Rome I Regulation implies the possibility of →dépeçage: the law of the Member State in which the risk is situated only governs the contract to the extent that the parties have not chosen the law applicable to the policy. Where the parties have selected the law only for a part of the life insurance policy according to art 3(1), the rest of the contract will be governed by the law applicable by virtue of art 7(3)(3) Rome I Regulation.

IV. Risks situated outside the EU/EEA: arts 3, 4, 6 and art 23 Rome I Regulation

With regard to life insurance policies covering risks situated outside the EU/EEA, different choice-of-law provisions may apply depending on the nature of the contract and the parties involved. This concerns, in particular, life insurance contracts entered into by a consumer: first, since art 23 gives precedence to certain choice-of-law rules set out in consumer Directives, the Rome I Regulation yields to national provisions transposing the respective Directives in this field. Second, art 6 Rome I Regulation provides for a special choice-of-law regime for consumers (→Consumer contracts). Only where neither of the aforementioned rules applies may the law governing the life insurance contract be determined pursuant to the general provisions in arts 3 and 4 Rome I Regulation.

1. Choice-of-law provisions in Directives: art 23 Rome I Regulation

With regard to life insurance contracts covering risks situated outside the EU/EEA, art 23 Rome I Regulation gives precedence to the choice-of-law regime contained in certain consumer Directives. Although art 23 Rome I Regulation only opens the way for these special rules ‘[w]‌ith the exception of Article 7’, this does not bar the application of special choice-of-law rules from European Directives to insurance contracts that are excluded from the scope of art 7 Rome I Regulation. Choice-of-law rules stemming from European Directives relevant in the context of life insurance contracts are, first and foremost, art 6(2) Unfair Terms Directive (Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, [1993] p. 1156OJ L 95/29) and art 12 (2) Directive on distance marketing of consumer financial services (Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC, [2002] OJ L 271/16). The application of the said provisions requires, inter alia, that the parties to the contract have chosen the law of a third country and that the life insurance policy presents a strong connection to the territory of the EU/EEA Member States.

2. Consumer contracts: art 6 Rome I Regulation

If a life insurance contract does not satisfy the aforementioned criteria, the policyholder may still benefit from special choice-of-law provisions for consumers found in art 6 Rome I Regulation, provided that its requirements are met. Recital (32) only excludes the applicability of the consumer regime to life insurance contracts that fall within the scope of art 7 Rome I Regulation. Hence, with regard to life insurance policies covering risks situated outside the EU/EEA, art 6 Rome I Regulation remains applicable (see as to the details of this conflict-of-law provision →Consumer contracts). Moreover, a life insurance contract entered into by a consumer is generally not excluded by virtue of art 6(4): first, the carve-out in art 6(4)(a) Rome I Regulation relates only to contracts for the supply of services in a country other than that where the consumer has his habitual residence. Under a life insurance policy, however, the insurer will usually have to provide services such as, for example, payments in the consumer’s country of residence (see eg Jürgen Basedow and Wolfgang Drasch, ‘Das neue Internationale Versicherungsvertragsrecht’ [1991] NJW 785, 789; Christian Heinze, ‘Insurance Contracts under the Rome I Regulation’ [2009] NIPR 445, 450). Furthermore, even life insurance policies in which the payment structure is tied to the performance of certain →financial instruments may typically be regarded as not being ‘rights and obligations which constitute a financial instrument’ within the meaning of art 6(4)(d) Rome I Regulation. This construction is in line with recent ECJ case-law on the distinction between life insurance and financial instruments (cf Case C-166/11 Ángel Lorenzo González Alonso v Nationale Nederlanden Vida Cia De Seguros y Reaseguros SAE [2012] OJ C 118/7, para 25).

3. Arts 3 and 4 Rome I Regulation

The parties to a life insurance contract covering risks outside the EU/EEA may choose the law applicable to the policy pursuant to art 3 Rome I Regulation within the limitations of party autonomy set out in art 3(3), (4) (→Party autonomy), art 9 (→Overriding mandatory provisions) and art 21 Rome I Regulation (→Public policy (ordre public)).

Insofar as the parties have not made a choice under art 3, the law applicable to the life insurance policy must be determined in accordance with art 4 Rome I Regulation. In most cases, art 4(1)(b) Rome I Regulation will apply given that life insurance contracts are ‘contracts for the provision of services’. This follows from the reference in Recital (17) Rome I Regulation according to which the concept of ‘provision of services’ should be interpreted in the same way as when applying art 7 Brussels I Regulation (recast). Therefore art 4(1)(b) Rome I Regulation requires, at the least, that the party who provides the service carries out a particular activity in return for remuneration (cf Case C-533/07 Falco Privatstiftung, Thomas Rabitsch v Gisela Weller-Lindhorst [2009] ECR 2009 I-3327, para 29). Life insurance contracts meet these requirements because the insurer’s →contractual obligations consist of organizing the collective of the insured, taking over the specific risk and providing insurance cover defined in the policy in return for payment of the insurance premium. This reading of art 4(1)(b) Rome I Regulation is supported by other fields of European Union law where insurance policies are similarly treated as contracts for the provisions of services (cf eg Recital (20) Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services, [2004] OJ 2004 L 373/37; art 2 lit. b Directive on distance marketing of consumer financial services).

Article 4(1)(b) Rome I Regulation leads to the application of the law of the country where the service provider has his habitual residence. The law applicable to life insurance contracts is therefore the law at the insurer’s habitual residence (cf eg Jürgen Basedow and Jens Scherpe, ‘Das p. 1157internationale Versicherungsvertragsrecht und “Rom I”’ in Stephan Lorenz (ed), Festschrift für Andreas Heldrich zum 70. Geburtstag (CH Beck 2005) 511, 515; Christian Heinze, ‘Insurance Contracts under the Rome I Regulation’ [2009] NIPR 445, 450). Since the insurer is a legal person, the habitual residence must be determined according to art 19 Rome I Regulation (→Domicile, habitual residence and establishment). The →escape clause in art 4(3) may only be drawn upon where the life insurance contract is ‘manifestly more closely connected’ with another state than the country of habitual residence of the insurer indicated in art 4(1)(b) Rome I Regulation. The mere fact that the risk covered by the insurance policy is located in a state other than the habitual residence may in itself, therefore, never justify the operation of the escape clause.

V. Recognition and enforcement

Within the scope of application of the Brussels I Regulation (recast) (→Brussels I (Convention and Regulation)), the rules on jurisdiction in art 8 et seq apply to disputes in matters relating to life insurance. Recital (13) justifies these special rules for insurance contracts by stating that the ‘weaker party should be protected by rules of jurisdiction more favourable to his interests than the general rules provide for’. In light of this, pursuant to art 14(1) Brussels I Regulation (recast), the insurer may usually bring proceedings only in the courts of the Member State in which the defendant (ie the policyholder, insured or beneficiary) is domiciled. Moreover, art 15 Brussels I Regulation (recast) imposes severe restrictions on choice-of-jurisdiction clauses in life insurance contracts (see as to the details Helmut Heiss, ‘Article 13’ in Ulrich Magnus and Peter Mankowski (eds), Brussels I Regulation (2nd edn, Sellier 2012) para 1 ff). Under the Brussels I Regulation (recast), recognition and enforcement of foreign judgments is subject to the rules in art 36 et seq.

Particular problems arise in the context of international life insurance contracts and English solvent schemes of arrangement. The latter instrument is used in the (re)insurance business not only with regard to run-off but also in connection with active life insurance portfolios. The German Federal Court of Justice has recently refused to recognize an English scheme under the Brussels I Regulation that would have affected a German life insurance policyholder who contracted with an English insurer (German Federal Court of Justice (BGH), 15 February 2012 [2012] NJW 2113. See also Higher Regional Court (OLG) of Celle, 8 September 2009, [2010] VersR 612. Contra, however, Regional Court (LG) Rottweil [2010] BeckRS 13330).

VI. Need for review and possible future developments

The choice-of-law regime for insurance contracts under the Rome I Regulation was in need of reform already at the time it was promulgated: having retained the distinction between mass risks located inside and outside the Member States, art 7 Rome I does not cover all life insurance contracts. Instead, different choice-of-law rules apply: whereas art 7 covers only insurance contracts relating to risks inside the EU, arts 3, 4, 6 and art 23 Rome I Regulation have to be drawn upon for all non-EU risks. In view of the wording of art 1(4), it is uncertain whether art 7 Rome I Regulation is applicable to risks situated in EEA Member States. Finally, where life insurance contracts fall inside the scope of art 7, party autonomy remains limited pursuant to art 7(3) Rome I Regulation. This is true even for experienced parties such as multinational corporations contracting group life insurance for their employees: the exclusion of life insurance from the concept of ‘large risks’ by virtue of art 7(1), (2) Rome I Regulation prevents these entities from enjoying an adequate level of freedom of choice.

The complex and incongruous nature of European private international law in the field of insurance may, at least in part, explain why the Common Market for life insurance has gained but little practical relevance. Contracting across borders still implies many hurdles for insurers and insured alike. For example, given the constraints under art 7(3) Rome I Regulation, life insurance companies may find it hard to subject policies with insured from different Member States to a single law (cf Louise Merrett, ‘Choice of Law in Insurance Contracts under the Rome I Regulation’ (2009) 5 J Priv Int L 49, 60). But since the substantive laws of the Member States still reflect considerable differences with regard to life insurance (cf Jürgen Basedow and Till Fock (eds), Europäisches Versicherungsvertragsrecht, vol 1–2 (Mohr Siebeck 2002)), calculating and marketing a uniform life insurance policy that may be offered in all EU jurisdictions appears neither legally possible nor economically viable.

p. 1158This is regrettable since a true Common Market for life insurance seems to be desirable from both the insurers’ and the insured’s perspectives: actuarial science and hence life insurance business relies on the law of large numbers and the diversification of risk. It might therefore be more efficient – and less costly in terms of premiums – if a single ‘European’ tariff could be developed. This holds especially true for policyholders who make use of the Common Market freedoms and move across borders. In light of this, the creation of a uniform substantive legal regime presents many advantages: the PEICL contain a separate section on the insurance of fixed sums and therefore also apply to life insurance contracts (see art 13:101 PEICL; Jürgen Basedow and others (eds), Principles of European Insurance Contract Law (Sellier 2009) 281 et seq). Against this backdrop, the European Commission has already explored the need for removing contract law-related obstacles to the design and distribution of life insurance products’ and has set up an Expert Group on a European Insurance Contract Law (cf Commission, ‘White Paper – An Agenda for Adequate, Safe and Sustainable Pensions’ COM(2012) 55 final, 18 and Commission decision of 17 January 2013 on setting up the Commission Expert Group on a European Insurance Contract Law, [2013] OJ C 16/6).

Literature

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  • Peter Koch, Geschichte der Versicherungswirtschaft in Deutschland (VVW 2012);

  • Jan D Lüttringhaus, ‘Art. 1’ in Franco Ferrari (ed), Rome I Regulation (Sellier 2014) Jan D Lüttringhaus, 'Art. 7 Rom I-VO Versicherungsverträge' in beck-online.GROSSKOMMENTAR (CH Beck 2016);

  • Louise Merrett, ‘Choice of Law in Insurance Contracts under the Rome I Regulation’ (2009) 5 J Priv Int L 49;

  • Stefan Perner, ‘Das Internationale Versicherungsvertragsrecht nach Rom I’ [2009] IPRax 218.