Real estate and life insurance policies: an interesting alternative

In a rock-bottom interest rate environment, savers are eager for higher returns than currently offered by EURO funds. Unit-linked life insurance policies from Luxembourg offer an extensive range of investments and vehicles, providing a compelling alternative to fixed income products.

One of these alternatives is incorporating real estate into life insurance. Real estate offers attractive profitability — and, depending on the policyholder’s country of residence, an appealing tax regime. However, the proportion of real estate investments is limited by the type of policy and the assets’ liquidity constraints.

The rules set out in the Commissariat aux Assurances' Circular Letters

As early as 2008, the Luxembourg regulator introduced new assets eligible as alternative investment vehicles, including hedge funds and real estate, in its Circular Letter 08/1. However, the proportion of these assets  in an insurance contract is limited because they are less liquid than UCITS.

Therefore, life insurance companies may offer these real estate funds as part of their external fund range. Annex 2 of Circular Letters 08/1 and 15/3 sets out the parameters of use regarding each policy’s total value.

Real estate funds have also appeared in the eligible asset catalogs of Internal Collective Funds (ICFs) and Internal Dedicated Funds (IDFs). The limits of exposure to these assets are based on the policyholder's classification, which is determined by their premiums and total assets. This classification was officially set by the Commissariat aux Assurances’ Circular Letter 15/3. 

For Type C and Type D funds, the Luxembourg regulator set no overall limit and no limit by issuer. Type C concerns policyholders who invest a minimum of €250,000 in all their policies with an insurance company and who declare that they have a securities portfolio worth €1,250,000 or more. Type D comprises of policyholders who invest a minimum of €1,000,000 in all their policies with an insurance company and who declare that they have a securities portfolio worth €2,500,000 or more1.

Investing through unlisted real estate companies

Real estate exposure can also be achieved by investing in unlisted real estate companies. These real estate assets are eligible for an ICF or IDF — but, they must be within the limits set by Annex 1 of the Commissariat aux Assurances’ Circular Letter 15/3. Therefore, an investor may decide to transfer the shares they hold in their family company to their IFD, which would include their real estate assets.

In these cases, a significant advantage of Luxembourg regulations is that the policyholder, or the policy’s beneficiaries, can recover their claim against the Luxembourg life insurance company in kind — for example, the shares in the family company transferred to the IDF. This avoids having to liquidate or dismantle the company when the policy ends.

These are just a few examples of how to benefit from the advantages of real estate investment through a Luxembourg life insurance policy — while still respecting the limits set out by the Commissariat aux Assurances’ Circular Letter 15/3 and the rules in force of the policyholder’s country of residence.

1 Circular Letter 15/3 from the Luxembourg Insurance Commissioner:


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The Commissariat aux Assurances (Insurance Commission) has authorised the holding of real estate assets in a life insurance contract since circular letters 08/01 and 15/03. Real estate funds are mainly eligible within internal collective funds (ICFs) and internal dedicated funds (IDFs) and the investment possibilities are determined by the policyholder risk profile.