April 30, 2020
The Luxembourg financial and insurance industry has always differentiated itself through an innovative approach meeting the requirements and expectations of private clients and their families living in Europe and beyond.
One key example within the context of the insurance industry is the well-known Specialised Insurance Fund, or SIF, created following the issuance of the Circular Letter 15/3 by the Commissariat aux Assurances (the Luxembourg Insurance Regulator, or CAA) on 24 March 2015.
What is the SIF?
The SIF is an internal fund of the insurance company, which serves as an investment support or vehicle for a life policy, under which the investment performance is not guaranteed. This is typically a product where the policyholder bears the investment risk if compared to well-known products such as the French “Fonds-Euro”.
Besides, the SIF is an internal fund which distinguishes itself from other investment supports such as the well-known Internal Dedicated Fund or IDF. Indeed, whereas the IDF is typically managed by a “single or unique manager” as defined in the CAA regulations and requires a minimum premium contribution of EUR 125.000, the SIF is not bound by such regulatory limitations[1].
It is however important to highlight that this specific vehicle cannot be used in all markets so it is strongly recommended to get in touch with your insurance intermediary / insurance carrier representative to assess possibilities.
On this point it is worth mentioning that OneLife developed a fully compliantSIF solution for the French market in 2019, and for the Portuguese market in 2020.
How can the SIF be used to optimise investments?
One of the key advantages of the SIF is that the policyholder choses the underlying investments. Therefore, the subscriber remains the key decision maker regarding the underlying investments in his/her policy. This approach offers an additional advantage in terms of costs, as subscribers willing to opt for such a solution will not have to face the supplementary costs applied by asset managers in discretionary managed portfolios.
Whereas engaging an asset manager is not required, OneLife offers in Portugal an innovative “Advisory” solution under which the participation of an “Advisor” is required in order to assist the subscriber with expertise in investment decisions, monitor the investment compliance and place the appropriate investment instructions by the dealing platform / custodian bank of the policy.
Which investments are eligible for the SIF solution?
Whilst Luxembourg regulations applicable to the SIF envisage investment limits depending on the value of the policy and wealth of the subscriber, which are rather broad and flexible, OneLife has defined a universe of investments for its Portuguese unit-linked insurance product (i.e. Wealth Portugal) to better guide our clients. This solution intends to provide its prospective clients with the greatest flexibility while complying at the same time with the applicable regulations and minimising investment risks, especially for certain categories of highly illiquid and risky assets. Indeed, the SIF solution designed by OneLife for the Portuguese market and aimed at catering for an active asset management, typically includes investment funds (for instance, UCITS), ETFs, structured products…
How does the SIF investment solution interplay with a unit-linked life assurance offered to Portuguese resident investors?
As mentioned before, the SIF remains one of the many investment solutions available to tailor investments under a unit-linked policy issued by Luxembourg insurance carriers and offered in European markets, such as Portugal.
Therefore, the use of the SIF solution does not jeopardize any of the advantages or benefits provided by a unit-linked life assurance policy such as the Wealth Portugal product offered by OneLife. As an example, a life policy issued by a Luxembourg insurer offers an advantageous tax treatment for Portuguese investors (details may be found here ) and an enhanced asset protection scheme in case of insolvency or bankruptcy of the insurance company or the financial institution holding the assets of the policy (details may be found here)
Where to find additional information?
OneLife has produced a tailor-made brochure covering the SIF solution available here.
Should you have any questions on the above, do not hesitate to contact your usual OneLife representatives.
Your OneLife team
[1] Please note that OneLife nevertheless applies a default minimum of EUR 125.000 as initial premium for its insurance products offering the SIF investment solution, notably, the Wealth product, made available to Portuguese resident investors.
