On 22 December 2022, the Commissariat aux Assurances (the CAA) released Circular Letter 22/22 on the takeover of intermediation in certain types of life insurance contracts (Circular 22/22).
This circular provides guidelines on issues that may arise in the context of a takeover of insurance intermediation (reprise d’intermédiation).
1. Scope of application
Circular 22/22 applies to insurance brokers and insurance agents mandated by several life insurance companies not belonging to the same group (In-Scope Intermediaries), whenever the In-Scope Intermediary takes over the intermediation of "savings and other investments" or "bearer" contracts.
The circular defines "savings and other investments" contracts as single, regular or variable premium life insurance policies, typically aiming to provide savings and investment flexibility, which permit surrenders and transfers (e.g. a unit-linked life insurance policy with premiums exceeding the tax deduction). “Bearer contracts” are defined as life insurance policies which, regardless of their other characteristics, facilitate anonymity for the policyholder and/or beneficiaries.
The circular also sets out the following non-exhaustive list of situations when a takeover may occur:
The policyholder grants a brokerage mandate to a broker other than the one who acted as insurance intermediary when the life insurance policy was underwritten.
The policyholder grants a brokerage mandate to a broker for a life insurance policy that was marketed directly by the insurance undertaking or through one of its agents.
The policyholder makes a request to replace the broker acting as an insurance intermediary on the life insurance policy with an agent, and vice versa.
An insurance intermediary transfers distribution activities on one or more life insurance policies to another intermediary.
An insurance undertaking transfers to an insurance intermediary the distribution of one or more life insurance policies that had previously been marketed directly.
The circular also stresses that the guidance it contains is without prejudice to the AML/CFT rules generally applicable to the entities concerned.
2. Key considerations
Circular 22/22 focuses on three areas where In-Scope Intermediaries should adopt the following best practices when taking over an insurance contract.
In-Scope Intermediaries are expected to have internal procedures that provide for situations where they take over an insurance contract.
In-Scope Intermediaries are expected to take account of the impact of taking over intermediation in their AML/CFT overall risk assessment, as well as in their AML/CFT policy and procedures.
With regards to AML/CFT policies, Affected Intermediaries should perform an individual assessment at customer level, taking into account in particular:
The capacity of the outgoing distributor as a third-party introducer within the meaning of the Luxembourg AML/CFT rules.
The AML/CFT policies and procedures of the outgoing distributor.
How the insurance policy was distributed by the outgoing distributor.
The funds invested in the insurance policy as initial, periodic or variable premiums before the takeover of intermediation, including their economic and geographical origin.
Any changes in the parties to the insurance policy that occurred before the takeover.
Any changes regarding the situation of the client before the takeover (e.g. change of domicile, change of professional activity).
Any significant activities under or changes to the contract before the takeover (e.g. partial surrenders, ad hoc payments or changes to the beneficiary clause).
In-Scope Intermediaries should then apply appropriate mitigating measures, including, in particular, the gathering and assessment of supplementary documents and information.
Rules of conduct
Circular 22/22 provides a list of information and documents that In-Scope Intermediaries should collect when taking over the intermediation of a contract.
In-Scope Intermediaries are then required to apply the legal obligations relating to the rules of conduct on the basis of the information they have gathered. The CAA expects particular attention to be paid to potential conflicts of interest.
Circular 22/22 has been applicable since 1 January 2023.
To read the Circular Letter (French only), click here_