Luxembourg life insurance
A life insurance contract taken out with a Luxembourg insurer, valued for policyholder protection through the security triangle and super-priority, and for its range of investment options.
A French resident may take out life insurance with an insurer established in Luxembourg, operating under the freedom to provide services. The contract is then governed by Luxembourg law for its protection, but the applicable taxation remains that of the policyholder's state of residence: there is no tax advantage for a French resident. Its appeal rests on three features. The security triangle first: assets backing the liabilities are deposited with an approved custodian bank, separate from the insurer, and a tripartite agreement with the regulator, the Commissariat aux assurances, allows it to freeze them in case of difficulty. Super-priority next: policyholders form a separate pool that ranks ahead of all the insurer's other creditors, including the state, on these assets. The range last: dedicated internal funds, managed to measure for a single client, collective funds, options in several currencies, accessible above high investment thresholds. The contract mainly serves a wealthy, mobile clientele that changes country of residence and wants a contract that follows it. The trade-off is heavier administration and, often, no euro fund as protective as in France, the capital guarantee then resting on the insurer or a reinsurer.
Hypothetical case: a French entrepreneur planning to move to Spain places 3 million euros in a Luxembourg contract with a dedicated internal fund. After the move, the contract remains valid and follows Spanish taxation; if the insurer failed, its assets, held by the custodian bank, would return to him as a priority.
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