On 28 January 2026, the Commissariat aux assurances (CAA) released circular letter 26/1 on investment rules for unit-linked life insurance products (the “Circular Letter”), together with its annexes regarding (i) investment rules for internal collective funds and dedicated funds, (ii) limits on investment in external funds and structured products and (iii) the list of financial instruments under the Circular Letter. The CAA also published circular letter 26/2 amending circular letter 16/9 of the CAA relating to the deposit of transferable securities and cash used as assets matching technical provisions of direct insurance undertakings and pension funds subject to the supervision of the CAA.
The Circular Letter intends to strengthen the competitiveness of Luxembourg life insurance products, notably by allowing direct investments in structured products, while also ensuring investors’ protection and providing more alignment with the financial sector (in particular the funds sector) for certain definitions of products. The main highlights of the new Circular Letter are summarised below.
CAA specifies local rules on product governance and client information
The Circular Letter now sets out the CAA’s expectations in terms of product governance for unit-linked life insurance products, including requirements on the target market analysis to be performed by insurance undertakings (new Section 4 of the Circular Letter). These requirements supplement product governance requirements already applicable under Commission Delegated Regulation (EU) 2017/2358 of 21 September 2017 supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to product oversight and governance requirements for insurance undertakings and insurance distributors.
The Circular Letter further provides for additional disclosure requirements in relation to Key Information Documents (“KIDs”), as provided for under Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs). The Circular Letter provides that return decreases of insurance products must be displayed in an accurate, fair, clear and non-misleading manner (New Section 9 of the Circular Letter).
Direct investments in structured products
The Circular Letter now also enables, within certain limits, direct investments in structured financial products, whether with or without enhanced guarantees. In certain cases, depending on the asset class, life-insurers must obtain the policyholder’s explicit prior consent and provide an information notice explaining the specific risks associated with the investment (see new Section 6 of the Circular Letter).
Changes in relation to Internal Collective Funds (“ICFs”)
The Circular Letter now allows life-insurance companies to launch ICFs addressed to policyholders of classes A, B, C and D (i.e. non-retail policyholders) without having to carry out a prior notification to the CAA, thus accelerating and simplifying the process. Furthermore, the amendments to circular letter 26/2 now formally allow insurance companies to hold the assets of ICFs addressed to policyholders of classes A, B, C and D at the level of a non-EEA credit institution, provided certain conditions are met.
Harmonisation of definitions used under the Circular Letter
The Circular Letter now includes amended definitions of external funds that expressly refer to relevant EU legislation, including Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (recast) and Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (so-called AIFMD).
The definition of “financial instruments” under the Circular Letter was not, however, harmonised to include financial instruments issued on a distributed ledger technology (“DLT”), including e.g. blockchain technologies. The current definition thus remains in contradiction with the definition of financial instruments currently provided for under the law of 5 April 1993 on the financial sector, as amended.
Temporal scope of the Circular Letter
The Circular Letter recasts CAA circular letter 15/3 on investment rules for unit-linked life insurance products and applies to insurance policies concluded on or after 1 February 2026. The Circular Letter further specifies that circular letter 15/3 continues to apply to insurance policies subscribed before 1 February 2026, with the option for life-insurance undertakings to amend the conditions of a relevant policy to reflect the new investment rules of the Circular Letter.
Should you have any questions on the above, do not hesitate to contact one of our experts in the regulatory team.
