Accepting beneficiary: a beneficiary nominated in a life insurance policy who has explicitly accepted the benefit of the policy and thus becomes the accepting beneficiary.

Assignment of claim: is a legal transaction involving three parties. One person (the assignee/insurance company), on the request of another person (the assignor/policyholder), makes a commitment to a third person called the delegatee (the bank) who accepts it as a debtor.

Assignment of rights: the rights arising under a life insurance policy, or an capitalisation policy, are assigned in whole or in part by the policyholder to a creditor, or to a third party. In an assignment, the rights are assigned to a creditor without transfer of ownership and the policyholder is no longer free to take any action concerning the policy (e.g. he must request authorisation to surrender it or to switch the policy’s assets). In the case of assignment to a third party, ownership generally passes with the rights, resulting in a change of policyholder.

Bare ownership: the ownership of a property without being able to use it, in contrast to the usufruct (see also, Dismemberment of ownership).

Beneficiary clause: Clause in a life insurance policy whereby the policyholder designate the person(s) who will be beneficiaries of the sums guaranteed on the death of the insured(s) (Beneficiary in case of death) or at the end of the term policy (Beneficiary in case of life).

Beneficiary: Person(s) designated by the policyholder who receives the benefits under the life insurance policy at the time of the insured event.

Bond: Units in borrowings /Debt securities issued by a company or a state.

Commissariat aux Assurances: It is the official Luxembourg supervisory body for the insurance and reinsurance sector.

Capitalisation policy: a medium/long-term investment.

Charge: the mechanism whereby the policyholder pledges his policy as collateral to a creditor in exchange for a loan. The insurer is not a party to the agreement, it is simply informed about the transaction.

Circular Letter 15/3: the Circular Letter from the Luxembourg Insurance Commission (Commissariat aux assurances luxembourgeois), which defines the investment rules relating to life insurance products linked to investment funds. This Circular Letter was published in March 2015, and amended by Circular Letter 19/2 of 15 January 2019.

Collateral: the act of pledging one's life insurance or capitalisation policy as a guarantee to a creditor (e.g. a bank) in exchange, particularly, for a loan.

Custodian bank: Bank mandated by the issuer of a fund to safeguard the securities of the fund and carry out transactions on behalf of the fund.

Death benefit: Sums guaranteed by the insurance policy in the event of the death of the insured.

Derivatives: financial instruments whose value depends on another instrument (the underlying).

Discretionary management: Type of management of a portfolio of assets or of a fund whereby the financial manager takes the investment decisions itself on behalf of its client, often in the context of a predefined investment profile.

Dismemberment of ownership: the separation of full ownership of an asset into two distinct rights: usufruct and bare ownership.

ETF:an Exchange Traded Fund is an investment fund or unit trust, which objective is to replicate its benchmark index performance, both upwards and downwards, as faithfully as possible, and at the lowest possible cost.

External fund: An external fund is a collective investment undertaking established outside the insurance company and subject to an approval procedure and to continuous prudential oversight on the part of a state supervisory authority. (Example: UCITS, investment funds, etc.)

Freedom to Provide Services: European Directive granting all approved insurance companies established in a member state of the European Union (EU) the benefit of a European passport allowing it to exercise its activity in all the other EU countries without having to be physically established there.

Foundation: is a legal entity, created by its founder, into which assets are transferred for defined purposes and in favour of specific beneficiaries.

GDPR(General Data Protection Regulations): these are the regulations which concern the processing of personal data of individuals. They came into force in May 2018.

Guaranteed fund (EURO Fund): guaranteed financial support offered by the insurance company and which may give rise to a possible profit-sharing.

Hedge Funds: privately organised alternative funds with broader investment opportunities than Unit Trusts, through the use of derivatives, short selling or leverage, for example. These funds offer attractive remuneration for their managers based on the vehicle’s performance.

High Net Worth Individuals (HNWI): term used by financial sector professionals to categorize people whose financial assets exceed USD 1 million. Ultra High Net Worth Individuals exceed USD 30 million in financial assets.

IDD: the EU directive which came into force on 1 October 2018. It introduced new rules for the distribution of insurance products, in particular regarding:

  • the oversight and governance of such products;
  • the professional requirements for distributors and managers of the distribution;
  • the management of conflicts of interest;
  • the financial incentives for distributors;
  • the Key Information Document (KID) given to clients before they subscribe to a policy;
  • distribution of insurance products.

Insured: Person on whose life the risk of the insured event rests.

Internal collective fund (FIC): Limited set of assets of an insurance company, with or without a guaranteed return, open to a large number of subscribers.

Internal dedicated fund (FID): Internal fund with no guaranteed return and serving as the vehicle for a single policy.

Internal fund: Collective or dedicated segregated set of assets of an insurance undertaking, with or without a guaranteed return.

Intermediary: the person or company serving as the link between the insurance company and the policyholder. He/it facilitates investment and underwriting, and provides his/its services throughout the life of the policy.

Irrevocable beneficiary: the life insurance policyholder who has nominated one or more beneficiaries and has renounced his right of cancellation. The beneficiary therefore acquires the rights under the policy during the lifetime of the policyholder or the insured. The policyholder is no longer free to take any action concerning the policy.

Life insurance /life assurance: Insurance contract guaranteeing the payment of a capital or an annuity in favour of the beneficiary(ies) at the time of the occurrence of the insured event.

Manager / Financial Manager: An entity duly approved by the competent controlling body of its country of residence, mandated by the insurance company to execute the management mandate of a fund, whether internal collective or internal dedicated.

MIFID 2 (Markets in Financial Instruments Directive): an EU directive which lays down rules for the provision of investment and/or ancillary services, including the distribution of financial instruments and structured deposits. The main purpose of these regulations is to provide better protection for investors.

NAV: Net asset value or price of a unit of account at a given time.

Non-habitual resident: a tax regime specific to Portugal. It applies, on certain conditions, to individuals who, as tax residents in Portugal during the previous five years, have not paid tax. It enables them to benefit from attractive tax deductions. Find out more about this tax system.

Pledge: the assignment of a life insurance policy by the policyholder to the creditor, as security for a debt. 

Policyholder or subscriber: Natural or legal person entering into commitments with the insurance company.

Portability: means the ability of a life insurance policy to adapt to the local law of the policyholder's country of residence, in accordance with changes in his residence.

PRIIPs (Packaged Retail and Insurance-based Investment Products): the EU regulation which has governed the Key Information Documents (KIDs) for insurance-based products since 1 January 2018. Its aim is to improve the transparency and comparability of these products for the policyholder.

Private equity: this is an investment asset class generally defined as an alternative investment. It involves investing, in a personal capacity, in so-called private companies, for example, those not listed on the stock markets.

RAIF (Reserved Alternative Investment Fund): a type of investment fund which can invest in all types of assets. This is qualified as an alternative investment fund and is not itself subject to product authorisation by the CSSF. RAIFs must appoint an authorised external Alternative Investment Fund Manager (AIFM). If the manager is based in the EU, RAIFs can market their shares, units or partnership interests to well-informed investors throughout the EU using a specific passport.

Real Estate Investment Fund: a collective investment where at least 60% of the fund is directly or indirectly invested real estate assets.

Risk profile: this shows the ability of an investor to tolerate a combination of risk.

Share: Part of a company's capital in the form of a negotiable security.

Solvency(Solvency margin): this is the minimum amount of eligible own funds which an insurance company must have at its disposal in order to pursue its insurance business without restrictions. This amount is fixed by regulation and is intended to prevent insolvencies and thus protect policyholders.

Solvency ratio: this is used to assess the resilience of a company. It is the result of dividing its eligible own funds by the Solvency Capital Requirement. If the ratio is greater than 100%, it means that it is fully compliant with regulatory requirements. The higher the ratio, the stronger the company's balance sheet.

Speciality Insurance Fund (FAS): Internal fund, other than dedicated fund that serves as a support for only one contract; in which the policyholder selects the underlying assets himself and under his sole responsibility.

Structured product: a complex financial instrument which combines several financial instruments and the performance of which depends on the underlyings. The term of the investment is fixed at the time of issue of the structured product.

Super-privilege: in connection with a Luxembourg life insurance or capitalisation policy, policyholders have the benefit of an absolute preference, sometimes referred to in practice as “super-privilege" enabling them to receive their claims in priority over all other creditors of the insurance company in the event of the latter's default. They are thus first ranking creditors over the assets in the technical reserves.

Switch: (In the context of a unit-linked life insurance policy) Transactions consisting in buying units in one or more funds with the proceeds from the sale of units in one or more other funds.

Technical reserves: Sum of an insurance company's commitments to all policyholders.
Undertaking for Collective Investment in Transferable Securities (UCITS): Fund / Investment vehicle investing in transferable securities and allowing collective management.

Triangle of security: term used to describe the mechanism used to protect the policyholders of a Luxembourg life insurance policy. It is the physical and legal separation of the assets of the policyholders from the assets of the insurance company. It is evidenced by the signature of a tripartite deposit agreement between the insurance company, the custodian bank and the Luxembourg Insurance Commissioner.

Trust: a legal deed (in England, a Common Law deed) in which an individual or a legal entity transfers assets to the trust and confers control over these assets to one or more third parties, on behalf of one or more beneficiaries.

UCITS (Undertaking for Collective Investments in Transferable Securities): a financial investment or a portfolio in which the invested funds are placed in transferable securities or other financial instruments.

Underlying assets: within a life insurance policy or an capitalisation policy, an underlying asset is any kind of asset - authorised by Circular Letter 15/3 from the Luxembourg Insurance Commissioner - in which a policy may invest.

Unit of account: Share of an investment fund. Its value increases or decreases according to market trends. In a unit-linked life insurance policy, the insurer guarantees the number of shares but not their value.

Unit-Linked contract: A contract whose underlying assets allow it to invest in a variety of underlying instruments and which risk is borne by the policyholder. Its value varies upwards and downwards according to financial market developments

Unlisted securities:  A share is said to be unlisted when it cannot be traded in a stock exchange. In this case, the unlisted company has not called upon the public for its savings.

Usufruct: unlike bare-ownership, the fact of being able to use a property, or to receive income from it, without being able to dispose of it (e.g. to sell it). (see also ‘Dismemberment of ownership’, above).

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