On March 28, 2024, IVASS (Istituto per la Vigilanza sulle Assicurazioni) published the results of its first public consultation on the proposed investment limits for unit-linked insurance products, together with a new draft regulation under consultation. This marks a significant regulatory shift, as for the first time the Italian regulatory framework on investment limits may apply to EU-based insurers operating cross-border. Such a development challenges the established principle of home country control and raises important questions for Luxembourg-based insurers.
A shift in regulatory scope
Luxembourg insurers have played a complementary role in the Italian market for decades, offering compliant wealth management solutions like Internal Dedicated Funds (IDFs). These bespoke structures, tailored to meet the needs of affluent clients with often multifaceted circumstances, have traditionally operated under Luxembourg’s regulatory supervision, in line with EU principles.
However, the proposed IVASS regulation aims to harmonize investment limits for unit-linked policies across all players, citing enhanced consumer protection and a level playing field as its primary objectives. This broader scope, though, introduces new challenges, particularly in its application to investment structures like IDFs, which differ significantly from collective investment schemes typical of the Italian market.
The feedback provided by IVASS in response to industry comments upon first consultation reflects a nuanced, yet ambiguous position. On one hand, IVASS seems to imply that IDFs may fall outside the regulation’s scope. On the other hand, it reiterates that premiums collected in unit-linked policies are subject to collective management by the insurer. This dual interpretation has left market participants unsure about the actual reach of the proposed rules.
Implications for Luxembourg Insurers
The value proposition of Luxembourg-based insurers, known for its flexibility and adaptability to international regulatory frameworks, now faces a critical juncture. The new IVASS proposals, while focused on enhancing retail consumer protection, introduce elements that could impact the operations of core products such as IDFs, with the risk of limiting the range of international products offered to Italian customers.
This regulatory evolution requires careful assessment by Luxembourg-based operators, who have consistently excelled in delivering innovative and tailored solutions. Engaging in constructive dialogue with IVASS may help clarify ambiguities while ensuring that the efficiency and relevance of the Luxembourg model remain intact. It is essential for the sector to continue demonstrating its ability to meet the needs of a multifaceted international clientele, reinforcing its commitment to transparency and stability.
In an evolving regulatory context that moves toward greater uniformity, Luxembourg insurers have an opportunity to strengthen their collaboration with Italian authorities and other European stakeholders. A proactive and unified approach could help address potential uncertainties, ensuring that the unique features of more specialized products are understood and appreciated.
At the same time, it is crucial to ensure that the regulatory framework does not introduce rigidities that could constrain the insurers’ operations. Greater clarity from IVASS regarding the practical application of the new rules could provide the foundation for a balanced transition, enabling operators to continue working efficiently while preserving client trust and the competitiveness of the cross-border market.
A Broader Perspective
The proposed IVASS regulation highlights the growing divergence between national regulatory priorities and the realities of cross-border markets. For over 30 years, Luxembourg insurers have demonstrated resilience and adaptability in integrating into diverse regulatory environments. However, this latest development underscores the importance of proactive engagement and long-term strategic planning to maintain their competitive edge in the Italian market.
Filippo Mancini,
Senior Wealth Planner