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Two new circular letters, 15/3 & 15/4 on investment rules and custody rules for life assurance products linked to investment funds, have been issued by the Commissariat aux Assurances (CAA). The new rules will be in force from 1 May 2015.

The circular 15/3 will apply to any contract signed after 1 May 2015 or to any contract signed before that date by adding an addendum to the contract. The new circular letter introduces the concept of the client suitability profile as well as a type of fund known as the Specialised Assurance Fund (SAF), to be managed by the policyholder himself. Finally the circular letter modifies the definition and classification of some categories of funds and financial instruments. All these points are described in detail below.

The circular 15/4 will apply to any custodian agreement signed after 1 May 2015 or to any agreement signed before that date in case of modification. The new circular letter introduces the possibility to use EEA branches of financial institutions having their parent company in another EEA country.

LC 15/3 – Client suitability profile

The circular letter introduces a profiling of the client. This profiling is made once at the point of acceptance of a new client for all the underlying products he or she will subscribe as a client of Lombard International Assurance SA.

This profiling will determine the client’s risk profile and be classified into one of the following categories: N, A, B, C or D, defined below:
 

Policyholder category

 Minimum premium (taking into consideration all contracts)

Minimum wealth declared

Type N

None

None

Type A

EUR 125K

EUR 250K

Type B

EUR 250K

EUR 500K

Type C

EUR 250K 

EUR 1.25Mio

Type D

EUR 1Mio 

EUR 2.5Mio



While the same 5 types of categories remain, the following changes are important to note:

  • The minimum premium required to enter a type A has been decreased from EUR 250K to EUR 125K. This opens the dedicated fund product to clients with less than EUR250K.
  • The minimum premium required to enter a type D has been decreased from EUR 2.5Mio to EUR 1Mio. This enables clients with a premium of EUR1Mio to have access to the universe of financial instruments that was reserved for clients with 2.5Mio and above up to now.
  • The minimum declared wealth to enter a type C has been decreased from EUR 2.5Mio to EUR 1.25Mio. This could allow current type B funds to be upgraded to type C and have no limitation in investing into the authorised list of instruments defined in Annex1 of the circular.
  • The category assigned to a client will be applied to all the underlying products linked to his contract: internal dedicated, internal collective funds and specialised assurance funds.

The client will also have the possibility to request his classification into a higher category as long as he complies with the minimum wealth of this category under specific conditions. It is still possible for the client to request his classification into a lower category.

Internal collective funds and dedicated funds of type N, A, B, C or D are accessible to the policyholder respectively of type N, A, B, C or D. Dedicated funds are accessible to contract with a premium of EUR 125K and above. The minimum investment into a dedicated fund is EUR 125K.

LC 15/3 – A new type of fund – ‘Specialised Assurance Fund’

This new fund category is an internal fund investing in direct or indirect lines as well as cash. There is no entry condition on wealth and premium. There is no guaranteed return.

Each investment made within this fund is selected by the policyholder, at the take-on or through arbitrage.

The investment restrictions applied are the same as those applied to the internal dedicated fund and depend on the policyholder classification (i.e. a SAF can be categorised type C or D even if the minimum amount invested into the SAF is less than respectively EUR250K or EUR 1Mio). It is important to note that the use of this type of fund may be restricted to specific markets only depending on the tax requalification that may be induced by this self-managed fund.

The holdings of this Specialised Assurance Fund may be placed under custody with several different banking institutions.

LC 15/3 – Admissibility of financial instruments

The range of financial instruments admissible in the underlying funds of our policies has been increased substantially:

  • The circular letter has amended the list of A-Zone countries to the countries that have successfully implemented the rules Basel 2, 2.5 and where those from Basel 3 are on-going. These countries are South Africa, Saudi Arabia, China, Hong Kong, India, Singapore, Korea, Turkey and Brazil. This increases opportunities of investments into bond type and equity type products, as well as Real Estate and funds from those countries
  • The categories of alternative investment have also been simplified. This may have a positive impact on your existing holdings in such instrument in case of AIFMD compliance. Our investment compliance team is at your disposal for reviewing instruments on a case by case basis. This increases opportunities of investments into alternative funds domiciled in above country list.

LC 15/4 – Admissibility criteria for custodian banks

The CAA authorises custody of assets underlying our life insurance policies under the following conditions:

  • Bank with their head office located in the EEA:
  • All EEA branches are accepted – NEW
  • All non-EEA branches are not accepted
  • Banks with their head office located outside the EEA:
  • All non-EEA branches remain not acceptable (except for the branches located in the same country as the head office)
  • All EEA branches are accepted

Please also note that the custody outside EEA remains  admissible only for dedicated funds and Specialised Assurance Funds.

Please do not hesitate to contact our Investment Compliance department or your usual Lombard International Assurance representative if you have any queries or require further information.

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