Protection of Clients' Interests

In accordance with European directives, lawmakers in Luxembourg have established a strict regulatory framework designed to provide utmost protection for investors' interests. This regulatory framework provides a model and a reference for many neighbouring countries and offers many specific features that are extremely beneficial to the consumer.

In particular, it is the establishment of this unique system of safeguards that has contributed to bolstering the confidence of European consumers in products issued in Luxembourg.

Continuous monitoring

The Commissariat Aux Assurances (Insurance Commission), C.A.A., is Luxembourg's insurance industry prudential organisation. This organisation continuously monitors insurance companies in order to ensure compliance with all prudential regulations and solvency.

Companies are subject to prior approval.

The criteria for obtaining approval mainly concern the fitness for office and honesty of their directors and the quality of the company's shareholding.

Separation of assets

The assets representing technical provisions constitute the exact counterpart of the undertakings entered into by the insurance company in respect of policyholders. Legislation in Luxembourg requires companies to cover the amount of their undertakings by representative assets which are strictly equivalent in quality and quantity in order to be in a position to honour all engagements undertaken at all times. The security of the client's assets is therefore ensured and regularly monitored by the C.A.A.

With a view to guaranteeing failsafe security for investors, the law also stipulates that these assets must be accounted for distinctly from the company's own assets in order to rule out any possible confusion. There is a clear distinction between the "regulated" asset base (assets representing undertakings) and the free asset base (assets belonging to the insurance company).

Deposit of representative assets with a banking establishment.

In addition, the law in Luxembourg stipulates that assets representing commitments undertaken must be deposited in separate accounts with an accredited depository bank. This is a special feature of Luxembourg of major importance. This rule provides for double control carried out quarterly by the commission which assesses the balance between the undertakings accounted for by the company and declared by the latter and the amount of corresponding assets as declared by the depositary bank.

The clients' investment therefore constitutes an entirely different asset from that of the company. Savings entrusted to the company can only and exclusively be invested by the same on behalf of the policyholder.

The policyholder is a protected and preferential creditor.

The holder of an insurance policy issued in Luxembourg is the holder of a specially protected claim against the company. In fact, he or she benefits from a preferential right that prevails over all other creditors (public revenue office, social security organisations, employees, etc.) that can be exercised in relation to regulated assets. He or she also has a preferential right, though to a lesser extent, to the assets belonging to the company itself.