Luxembourg regulations are very strict in terms of securing investors’ funds.
Luxembourg provides for a dual mechanism to protect the assets of policyholders’ contracts through the establishment of a tripartite relationship between the insurance company, the custodian bank and the local regulator, the Commissariat aux Assurances , which monitors the financial soundness of Luxembourg insurance companies and the protection of their clients’ interests.
This relationship is illustrated by the Safety Triangle
- On the one hand, the premiums paid by the subscriber are segregated from the Company’s own funds and deposited with a bank with which the latter signs a deposit agreement countersigned by the Insurance Commission.
- On the other hand, policyholders have the status of first ranking creditors on the assets making up the insurer’s mathematical reserves. This “super lien” ensures priority over all other creditors of the insurance company in the event of its default.
A diversification of supports and currencies
Luxembourg regulations allow access to a more diversified investment universe. The subscriber can invest in euros or in foreign currencies in a wide range of funds (UCITS, listed or unlisted securities, dedicated internal funds, etc.) managed by renowned management companies, offering diversification in terms of asset class and international exposure.
The legal framework of the Luxembourg contract also allows the subscriber to have access to discretionary management by using a professional asset manager. The latter manages all or part of the contract through a mandate taking into account the objectives and investment profile of the subscriber.
The Luxembourg contract also allows the subscriber to invest in euros or in foreign currencies. The subscriber therefore has access to a list of funds, operations and valuation of the contract in foreign currencies.
The principle of tax neutrality applies in Luxembourg.
Indeed, subscribers who are not residents of Luxembourg are not subject to any local taxes. They are only liable for taxes applicable to the contracts in their country of tax residence. The risk of double taxation is thus neutralized, even in the event of a change of country of residence. Subscribers are only required to comply with the legislation of their country of tax residence.
The investment supports within the Luxembourg life insurance are varied. The subscriber can benefit from a DIF (dedicated internal fund), a CIF (collective internal fund) or a SIF (specialized insurance fund) depending on his or her strategy (need for liquidity on the date, performance, capital preservation, etc.).
In all cases, the funds are tailor-made and managed according to the management method chosen by the client: unrestricted management, advised unrestricted management or management under mandate.