What do you want to know?
Why choose a Luxembourg life insurance contract?
Luxembourg life insurance is a contract by which the insurer undertakes, against payment of premiums (also called cash payments), to pay a capital or an annuity to a specific person (called beneficiary) in the event of death. , or the life of the insured on a specific date.
The great advantage of life insurance in Luxembourg is Security.
This unique policy for the protection of policyholders, known as the “triangle of security”, ensures the legal and physical separation between the assets of policyholders on the one hand, and the assets of shareholders and other creditors of the insurance company. 'somewhere else.
The “safety triangle” is materialized by the signing of a tripartite deposit agreement between the insurance company, the custodian bank and the Luxembourg insurance supervisory authority (the Commissariat aux Assurances).
The safety triangle is ensured by
Segregation of assets: Technically, the funds invested by the saver are therefore not part of the company's balance sheet as is the case in French legislation. In other words, if the company were to go bankrupt, the assets of savers would be more easily recoverable. Securities are therefore deposited with an Approved Bank under the conditions set by the Commissariat aux Assurances.
The super-privileged role of underwriters: In the event of bankruptcy, they take precedence over other creditors. A saver will recover all of the technical provisions of his contract, but at market value. By way of comparison, in France, the financial guarantee is limited to 70,000 euros per insured and per insurance company.
Finally, we are talking about permanent surveillance between the three players: Insurer, Custodian bank, Commissariat aux Assurances. The Commissariat aux Assurances is the official Luxembourg body, it is therefore the CAA which ensures control over insurance assets and investments.
The Luxembourg contract not only authorizes payments in securities, but also in foreign currencies, which gives it unparalleled flexibility.
Luxembourg life insurance contract:
Security & Diversification
What is life insurance
in Luxembourg ?
Why invest in a Luxembourg life insurance contract?
Luxembourg life insurance is a contract by which the insurer undertakes, against payment of premiums (also called cash payments), to pay a capital or an annuity to a specific person (called beneficiary) in the event of death. , or the life of the insured on a specific date.
Luxembourg life insurance is mainly used nowadays as a savings vehicle in Luxembourg which has many advantages in terms of taxation (specific taxation of life insurance), inheritance transmission (life insurance inheritance), and capital security (superprivilege).
Luxembourg law provides for an effective protection system for the placement made.
We speak of a "safety triangle" formed by the insurance company, the depositary bank for investments and the insurance commissioner (CAA).
All of the policyholder's assets are held by a deposit bank independent from the insurer which must have been approved by the Insurance Commission (CAA).
It is up to the subscriber to have access to the sums thus placed with the custodian bank. Under no circumstances will the insurer or its creditors have access to it. Thus, the subscriber is protected from financial difficulties that the insurer could experience.
The custodian bank keeps the investments of the contract off its balance sheet. These assets are therefore not integrated into the bank's assets. In the event of difficulties encountered by the bank, the latter's creditors may therefore not have any right to the funds of the insurance contract.
In addition to this impossibility of access to the placement by a person other than the subscriber, the security of the placement is ensured by the CAA. It ensures control of insurance assets and their investment. It monitors the solvency of insurance companies and the custodian bank.
This protection system effectively guarantees the conservation of assets placed in life insurance.
In addition, policyholders benefit from a superprivilege which confers on them the status of first rank creditor of the insurance company on the mass of assets representing technical provisions.
Luxembourg life insurance
Life insurance is a contract by which the insurer undertakes, against payment of premiums (payments of money) by the subscriber, to pay a capital to a specific person (the beneficiary) in the event of death.
Luxembourg life insurance, like any life insurance, aims to enhance long-term financial savings, while organizing your succession, preparing for retirement or diversifying your assets.
Luxembourg offers life insurance contracts that differ from French contracts because they provide greater security for your capital in the event of the bankruptcy of insurance companies (the security triangle), tax regulations better suited to expatriates (fiscal neutrality), a wide choice of financial support via tailor-made funds (FID and FAS), as well as a selection of reference currencies other than the Euro (US dollar, British pound, Swiss franc, etc.).
Luxembourg life insurance contracts benefit from the same extremely advantageous taxation as life insurance contracts taken out with a French establishment and therefore from an advantageous tax framework. We speak of fiscal neutrality, it adapts to the country of residence of the subscriber.
This is why it has several major advantages for expatriates.
Internal Collective Funds (FIC)
Internal Collective funds are a type of investment support for a Luxembourg life insurance contract.
They are internal funds in the company allowing to collect the premiums of the customers on a single pocket. They are accessible to a group of investors who do not necessarily have family ties.
The policy and management defined in the contract must be in line with the risk profile of each client and which may change throughout the life of the contract.
The FIC has the advantage of lower management fees for the investor, the latter making his asset allocation within the funds offered by the Luxembourg insurer.
Its Luxembourg life insurance contract also bears the administrative costs and the costs of the custodian bank.
Diversification
Diversification
The subscriber can choose the currency in which his contract is denominated. This could for example be the euro, the Swiss franc, the dollar, the pound sterling.
The investments offered by insurers are diversified.
Thus, guaranteed rate products, investment funds external to the company, internal collective funds or dedicated funds under mandate can be used, or investments in liquid assets.
For each category of subscriber there is a type of internal collective fund. There are 4 types of dedicated funds for each category of subscribers A, B, C and D.
Except in special cases, access to dedicated funds is only admissible for contracts with a minimum subscription premium of € 125,000.
It is possible that a contract includes more than one dedicated fund, but the investment in each dedicated fund must reach at least 125,000 €.
The dedicated internal fund FID is a fund created especially for the subscriber and is accessible by him and / or his relatives.
The dedicated internal fund is held by the insurance company with which the contract has been taken out and the financial management is delegated to a single manager (which the subscriber chooses).
The advantage of FID is that it will be perfectly suited to the wishes of the investor because it is created for him. A manager under mandate is given a mandate for the management of this asset pocket, he establishes the profile of the FID taking into account the requests of the investor:
- a liquidity requirement of up to 50% of the FID with a maturity of 3 or 5 years;
- demand for yield real estate within the FID (Luxembourg real estate Sicav, FPS, etc.);
- a cautious profile in which the equities part (even reduced to 10%) will be oriented towards a specific geographical area.
Contract currency
It is possible to choose to denominate the Luxembourg contract in a specific currency: in general the choice is limited to the euro, the dollar, the pound sterling and the Swiss franc.
In this case, transfers, redemptions and capital transmitted to the beneficiary (ies) are made in this currency. However, we can have a contract denominated in Euros and be invested in dollars for example.
Specialized Insurance Fund (FAS)
Specialized Insurance Fund (FAS)
The FAS or Specialized Insurance Fund authorizes free management and / or advice through a life insurance contract in Luxembourg and is reserved for tax residents in France.
The choice of assets is made in an investment universe defined in advance, which may include in particular:
stocks and bonds;
units of mutual funds (UCITS);
or structured products and non-traditional investments, subject to prior acceptance by Lombard International Assurance SA
The advantage of FAS is the absence of a manager under mandate, the investor makes his asset allocation and the latter is held within the specialized insurance fund without any management fees.
FAS can be used for asset allocations relating to real estate investment funds, Luxembourg real estate SICAVs, professional funds specializing in commercial real estate, etc.
As these real estate assets are intended to be held over the long term, the costs of management under mandate are not justified.
The FAS is only intended for category C or D clients with the objective of investing for the long term. It is not possible (and even risky) for the subscriber to regularly carry out arbitrations on a FAS as a manager might do on a FID.
The “safety triangle” is materialized by the signing of a tripartite deposit agreement between the insurance company, the custodian bank and the Luxembourg insurance supervisory authority (the Commissariat aux Assurances).
The partitioning of assets is checked every quarter by the Commissariat aux Assurances. In the event of default by the insurer, the supervisory authority can block accounts to protect the rights of policyholders
Subscribers also have a superprivilege which grants them the status of first-rank privileged creditors of the insurance company on the mass of assets representing technical provisions.
This policyholder privilege, which takes precedence over all other creditors, whoever they are, must allow customers to recover as a priority the debts relating to the execution of their insurance contracts in the event of default by the insurance company. .
For each category of subscriber there is a type of internal collective fund. There are 4 types of dedicated funds for each category of subscribers A, B, C and D.
Except in special cases, access to dedicated funds is only admissible for contracts with a minimum subscription premium of € 125,000.
It is possible that a contract includes more than one dedicated fund, but the investment in each dedicated fund must reach at least 125,000 €.
To note : Luxembourg life insurance contracts benefit from the same extremely advantageous taxation as life insurance contracts taken out with a French establishment and therefore from an advantageous tax framework. We speak of fiscal neutrality, it adapts to the country of residence of the subscriber.
This is why it has several major advantages for expatriates.
Advantages & Disadvantages of Luxembourg life insurance
Luxembourg life insurance
Example of subscription to a Luxembourg life insurance contract
1
Initial situation
Rudy has an important heritage and wishes to diversify and secure his heritage.
He saved $ 150,000 from his last trip to the United States and decided to take out a Luxembourg life insurance policy.
Indeed, having part of his assets invested in French life insurance contracts, Jack's CGP offers him through the Luxembourg life insurance contract:
Take advantage of the safety triangle of the Luxembourg life insurance contract
To have access to many diversified investments
To have access to diversified management through external funds, internal collective funds, dedicated internal funds, specialized insurance funds (bonds, equities, structured products, international funds) far superior to French contracts.
And especially in his case, to invest with the currency ($, € ..) he wants without having to convert them.
2
Subscription to a Luxembourg life insurance contract
Rudy therefore accesses diversified management and selects several investment vehicles such as:
Securities listed on the stock exchange,
Investment funds (SICAV, FCP ...),
ETFs or unlisted shares.
They give the choice to be able to combine life insurance and real estate, or life insurance and private equity.
He now has a secure life insurance contract investing in various markets for € 150,000.
3
Partial repurchase
A few weeks later he decides to buy back his 10% contract, his contract now having a value of € 160,000 (ie a gain of € 1,000), the withdrawal will be € 16,000.
Luxembourg life insurance contracts benefit from the same extremely advantageous taxation as life insurance contracts taken out with a French establishment and therefore from an advantageous tax framework.
We speak of fiscal neutrality, it adapts to the country of residence of the subscriber.
This is why it has several major advantages for expatriates. And this, all the more so when they regularly change their country of residence according to professional changes.
The sums deposited in a Luxembourg life insurance contract are always available.
In addition, the tax is applied:
only on realized gains
mainly when you redeem sums (withdrawals or closing the contract)
each year for the sums invested in euro funds (for social security contributions)
When the insured is redeemed, the funds are made up of part of the capital and part of the interest.
Only interest is taxed, its capital never will be.
On his withdrawal of € 16,000, Jack will therefore only be taxed on € 1,000.
Rudy will therefore be able to choose between the single flat-rate deduction (PFU) of 12.8% or 7.5% depending on the case or income tax, to which social contributions will be added at the rate of 17.2%.
Note that on both types of contracts, only the gains are taxed and in no case the capital.