A legal challenge similar to the controversial Swedish SAFIR case on cross border life insurance and pensions rights, could be launched against the Finnish government by foreign life insurers, if plans, which could price them out of the market, are ratified by parliament.

The proposals, requiring all life companies operating in Finland to conform to a minimum 105% risk insurance cover, could drastically squeeze the margins of non-domestic pensions, unit linked and insurance pro-viders, eventually forcing them out.

Roger Phillips, head of legal and technical services at Skandia Life, says: We work on a 101% limit for our cover, but the Finnish government is saying if you don't agree to their new insurance definition, then you will not be able to claim any premium tax benefits and thus be unable to compete in the market."

However, Phillips says that Skandia for one is not going to roll over and accept the proposals.

"This is an issue on the nature of our products and their tax construction which is a member state issue. The fiscal regime at present offers full and fair competition, and any discriminatory reforms would carry the same penalties as in the SAFIR case, which we were behind. So, if push comes to shove we will pursue this matter through the courts and seek appropriate compensation."

Question marks have also been raised over whether the tax proposals are the result of government lobbying by Finnish life companies, unhappy at the negation of premium charges by foreign life insurer set-ups.

"Because of the nature of our products we charge nothing for life cover and still claim premium relief on pension benefit charges. But local players often have life charges because of their construction. In reality if they want to compete they should shake up their businesses, but the million dollar question is whether they have decided that back-door legal discrimination would be easier."

However, Kirisi Seppalä, director of tax at the Finnish ministry of finance, said:"This is nothing more than a question of making foreign pension and life insurance products follow the same rules as domestic players. They have known for a long time about these proposals and taken no action. Any court action would be unsuccessful, because there is no discrimination involved."

Risto Lintunen, at Aon Consulting, added:" The issue here is whether this is a violation of EU rules on free cross-border operations. Foreign companies are now in a difficult position because taxation is in favour of the domestic groups. There is also the factor of existing policies and how they should be treated. But ministers seem a littleconfused on the issue and I believe it probably will get passed in parliament and we may have a fight on our hands.""

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