The underlying assets, definitions and examples
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Traditional and less traditional assets that can be combined as underlying assets within a life insurance contract.
Underlying assets: a broad selection for a well-diversified portfolio
The wide range of the underlying assets in the contract allows a good diversification of the portfolio
The investments contained in a Luxembourg life insurance policy are subject to a series of eligibility rules defined by circular letter no. 15/3 (LC15/3) from the Commissariat aux Assurances (‘Luxembourg Insurance Control Authority or ‘CAA’).
The investment rules defined by the Commissariat aux Assurances
Circular letter 15/3 provides for five types of policy defined on the basis of two criteria, namely:
- the premium invested in all the policies subscribed with the insurance company; and
- a declaration of the policyholder's movable assets.
| Type of policy | Premium invested (in EUR) | Movable assets1 (in EUR) |
| N | Default | Default |
| A | 125 000 | 250 000 |
| B | 250 000 | 500 000 |
| C | 250 000 | 1 250 000 |
| D | 1 000 000 | 2 500 000 |
As discussed in the chapter "The unit-linked life insurance policy", the regulations in Luxembourg provide for various investment vehicles such as external funds, internal dedicated and collective insurance funds, and specialised insurance funds within unit-linked policies.
Examples of underlying assets
All the investment vehicles provide access to a wide range of underlying assets:
- Traditional assets such as:
- bonds
- shares
- UCITS
- derivative products
- Alternative assets such as:
- structured products
- alternative funds (hedge funds and private equity)
- real estate funds
- …
Each of these asset classes may be held within a life insurance policy based on the restrictions imposed by the circular letter and their compatibility with the policyholder's investment profile.
Luxembourg, a competence centre for portfolio diversification
The Luxembourg legislature is particularly attentive to the market and to the needs of wealthy investors and thus allows life insurance to be combined with private equity or with real estate.
In recent years, new trends have emerged and new structures such as the Reserved Alternative Investment Fund (or ‘RAIF’) have been introduced.
It is also possible to diversify one’s portfolio by using ETFs or socially responsible funds.
The opportunities for diversification offered by life insurance policies are therefore very broad and confirm the position of life insurance policies as the optimal estate planning and management tool.
1 Valuation of movable assets: the total value of the policyholder's financial instruments, plus bank deposits and the value of his life insurance and accumulation policies, less all types of debt (Circular 15/3 from the Commissariat aux Assurances).
The underlying assets of a Luxembourg life insurance contract are subject to the regulation of circular letter 15/3 of the Commissariat aux Assurances. The underlying assets can be traditional (bonds, shares, UCITS, ...) or alternative and must be in line with the risk profile of the policyholder.