The dedicated internal fund, defined by a strict regulatory framework in the Grand Duchy of Luxembourg, is the appropriate response to the legitimate concerns of wealthy investors: the life insurance contract investing in a dedicated internal fund allows personalization of management of assets, preservation and transmission of heritage.
Dedicated Life Insurance
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A dedicated internal fund, as defined by Luxembourg law, is a ring-fenced set of assets of an insurance company, whether or not including a return guarantee, and in principle, dedicated to a single contract. The dedicated internal fund is therefore intended for demanding investors wishing to benefit from tailor-made management of their assets within the exclusive framework of the Luxembourg life insurance contract.
The administrative and financial management of a dedicated internal fundis the responsibility of the insurer, which delegates these tasks to specialized managers on a discretionary basis. The management/risk profileof the fund’s assets is established on the basis of the subscriber ‘s personal investment objectives and previously defined parameters. In compliance withthe investment policy defined for the dedicated fund, the fund manager may invest ina wide range of equities and sophisticated products: live securities (equities and bonds ), UCITS , alternative products or unlisted funds.
Description of Luxembourg Life Insurance
Luxembourg life insurance is similar to French life insurance but has additional advantages that attract many investors. These top-of-the-range contracts are intended to provide good diversification of assets within a single tax framework.
In Luxembourg, the creditor benefits from the super privilege, that is to say that he is a first-class creditor. Also the customers’ money is deposited in a bank external to the insurance company.
Luxembourg life insurance offers great diversification, starting with the currency of the contract, which may be different from the euro.
The Luxembourg contract is widely used by people with strong geographical mobility, that is to say expatriates. This makes it possible not to be doubly taxed.
How does the “super privilege”, the security asset of life insurance under Luxembourg law, work?
In the comparative life insurance France and Luxembourg, it occupies a place of choice. The super privilege offers great security. In fact, the saver is considered as a preferred creditor by Luxembourg law, which imposes the total availability of the funds invested, even in the event of default by the insurer. Consequently, in the event of a crisis, the customer who has taken out a life insurance contract under Luxembourg law is the first of the creditors to recover his money, up to 100%.
Luxembourg insurance companies are required to separate their own funds, the assets of their shareholders, from the assets belonging to their customers. They deposit the sums of money invested by savers with approved custodian banks.
The “ triangle of safety ” thanks to which the creditor is reimbursed for all of his investment in the event of the insurer’s bankruptcy. This is an essential difference with the French life insurance contract which provides for a reimbursement ceiling for the subscriber of 70,000 euros in the event of the insurance company’s bankruptcy.
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