As well as boasting economic, financial and political stability, Luxembourg is known as a leading international financial centre with unique expertise in Europe and internationally. Luxembourg’s regulatory framework is one of the strongest and most responsive in Europe, offering clients many advantages and protecting their investments while fostering the development of life insurance activities.
One of the main advantages of taking out a life insurance policy with a Luxembourg insurance company is the asset protection mechanism known as the “Triangle of Security.” Three parties are involved in the Triangle of Security: the insurance company, the custodian bank and the insurance regulator (Commissariat aux Assurances or CAA). It provides policyholders a level of legal protection unique in Europe.
Luxembourg law requires that insurance companies manage the assets that represent its insurance commitments separately to its own assets. A depositary agreement binds the insurance company to the custodian bank and must be approved by the CAA before the insurer can deposit the assets representing its commitments. If the insurance company fails, this separation protects policyholders’ assets and ensures they can be recovered.
Luxembourg also grants insurance policyholders a “super-privilege” giving them a priority claim on the assets used for the execution of their contracts, ahead of all the insurer’s other creditors, including the government, employees and social security organisations.