The Luxembourg insurance sector is going through a delicate period with the insolvency of FWU Life Insurance Lux S.A. (FLL), a subsidiary of the German FWU Group. This event highlights the effectiveness of regulatory protection mechanisms, notably the security triangle, designed to safeguard policyholders' rights in the face of insurers' financial difficulties.
Intervention by the Commissariat aux Assurances (CAA)
On July 19, 2024, FLL notified the Commissariat aux Assurances (CAA) of its inability to meet solvency requirements, i.e. the Solvency Capital Requirement (SCR) and the Minimum Capital Requirement (MCR). In response to this alarming situation, the CAA activated a protective mechanism, freezing technical provisions in order to guarantee the "super-privilege" of policyholders, which gives them priority over creditors in the event of bankruptcy.
.On August 2, 2024, the Luxembourg District Court accepted a request for a stay of payment for a maximum period of six months, allowing FLL to draw up a financial recovery plan. If the latter does not result in a viable recovery, judicial liquidation proceedings could be initiated, either by the CAA or by the State Prosecutor.
Protective measures and implications for policyholders
The measures put in place by the CAA and the court include:
- The temporary suspension of new insurance policy subscriptions, which directly impacts the company's ability to generate revenue.
- The freezing of benefit payments due, ensuring that funds remain available to honor commitments to policyholders.
- The freezing of FWU accounts, ensuring that assets are used exclusively to cover contractual obligations.
These actions strengthen customer protection against financial risks, testifying to the robustness and resilience of Luxembourg's regulatory framework, which stands out for its proactive approach to insurance supervision.
Reactions from the authorities and information for policyholders
To respond to policyholders' concerns, the CAA has set up a dedicated email address: QA_FWULife@caa.lu. In addition, the Association des Compagnies d'Assurances et de Réassurances du Grand-Duché de Luxembourg (ACA) stresses the importance of the safety triangle in maintaining market stability. This transparency is essential to restore consumer confidence and ensure clear communication on policyholders' rights.
Conclusion: A robust framework in the face of financial challenges
The FWU Life Insurance Lux S.A. case highlights the robustness of Luxembourg's regulatory framework and the effectiveness of its protective mechanisms. Although the situation gives cause for concern, the system provides policyholders with substantial protection for their assets, underlining Luxembourg's ability to manage crises in the insurance sector while safeguarding customers' interests. This situation serves as a reminder of the importance of rigorous regulation and proactive supervision to ensure the sustainability of the insurance market.
This post was translated from the original French.