On 24 March 2015, the Commissariat aux Assurances ("CAA") issued two new circular letters.
Circular letter 15/3 on investment rules for insurance products linked to investment funds :
This circular letter (1) sets out rules relating to investments for life insurance products linked to investment funds (the "Investment Rules Circular") and repeals the amended circular letter 08/1 of the CAA. Where the majority of the contents of the Investment Rules Circular remain identical to the circular letter 08/1, a few points are worth noting.
The Investment Rules Circular introduces a new type of internal fund being the "specialised insurance fund" ("SPIF") defined as an internal fund other than a dedicated fund, with direct or indirect lines, without a guarantee of return and serving as support for a single contract. Accordingly, specific rules applicable to SPIFs have been introduced. SPIFs may for instance be used as a basis for unit-linked insurance based contracts and are not subject to minimum premium and wealth requirements. Each asset of a SPIF is directly chosen by the subscriber either at the moment of the investment of the initial or subsequent premium or during an arbitrage process.
The Investment Rules Circular also specifies that the investment limits for a specific asset must be inferred in light of limits applicable in Annex 1 and will depend on the categorisation of client pursuant to the Investment Rules Circular's provisions. Interestingly and contrary to dedicated funds, assets of SPIFs may be deposited with multiple depositaries and need not be deposited in a particular account or sub-account for each fund.
Moreover, the Investment Rules Circular also slightly amends the minimum investment and wealth requirements for two categories of subscribers. As such, the amount of minimum wealth in transferable securities for category C subscribers has been lowered from EUR 2.5 million to EUR 1.25 million whereas the minimum investment amount for category D subscribers was lowered from EUR 2.5 million to EUR 1.25 million.
The Investment Rules Circular now also defines the notion of wealth in transferable securities by specifying that it corresponds to the aggregate of (i) the value of financial instruments of the subscriber, any bank deposits and the value under any life insurance and capitalisation contract diminished by (ii) any debts of any nature. The insurer should refuse the declared value relating to the wealth if, based on the information received by the subscriber, he has doubts on such declaration. The Investment Rules Circular furthemore specifies under which conditions a subscriber may be categorised into a higher category.
The provisions of the Investment Rules Circular entered into force on 1 May 2015. Certain transitional provisions apply, however, such as those for dedicated funds existing prior to that date, which shall continue to be governed by the appendix to the insurance contract specified by the circular letters 95/3, 01/8 or 08/1. Regarding the new classification rules, the Investment Rules Circular specifies that such rules may be applied to existing contracts by way of an amendment deed. Should the application of these new rules result in a dedicated fund being categorised in a higher category, the appendix setting out the investment policy of the dedicated fund will need to be amended as a consequence.
Circular letter 15/4 to the deposit of transferable securities and liquidities used as assets representing technical provisions of direct insurance undertakings and pension funds subject to the supervision of the Insurance Commission :
This circular letter (2) relates to the deposit of transferable securities and liquidities used as assets representing technical provisions (the "Deposit Circular") of direct insurance undertakings and pension funds subject to the supervision of the CAA and repeals the amended circular letter 09/7.
In addition to some clarifications in respect of the entities with whom assets representing technical provisions located within the European Economic Area ("EEA") must be deposited, the Deposit Circular introduces a new provision in case of a change in the status of the credit institution. As such, where the credit institution changes its independent status to become a subsidiary of another credit institution or vice versa, the deposit agreement will need to be either amended or replaced by a new deposit agreement at the latest six months after the relevant change of status. Any changes to existing deposit agreements will need to be approved by the CAA.
Furthermore, the Deposit Circular slightly amends the tripartite model deposit agreement appended to the Deposit Circular. The revised deposit agreement now requires credit institutions to undertake to carry out without delay any blocking instruction from the CAA including in cases where the accounts to be blocked have been opened with agencies or subsdiaries located in the country of the addressee of the notification but at different addresses than that of the addressee. Moreover, credit institutions are now required to confirm that they have internal processes and means of communications allowing to carry out any blocking instruction without delay.
The Deposit Circular is also applicable as from 1 May 2015 and contains a few transitional provisions relating to (i) certain agreements linked to dedicated funds with deposit outside the EEA and entered into prior to 31 December 2010 and (ii) certain accounts regulated by deposit agreements pursuant to circulars 04/5 and 01/7 respectively which are no longer compliant with the up-to-date model deposit agreement appended to the Deposit Circular.
(1) Circular letter 15/3 of the CAA relating to investment rules for insurance products linked to investment funds dated 24 March 2015.
(2) Circular letter 15/4 of the CAA relating to the deposit of transferable securities and liquidities used as assets representing technical provisions of direct insurance undertakings and pension funds subject to the supervision of the Insurance Commission.