An overview
In somespecific situations that we will discuss in this dossier, one should consider the creation of a dedicated fund, widely known asunit-linked or, under a technical approach, a life insurance based investmentproduct. In some jurisdictions, these life insurance solutions are also knownas fonds dédies or life bonds. Whateverthe nomenclature, they all represent thesame concept. This concept, as well as its legal framework, are described inthe following article of this dossier.
Flexible,able to attract sophisticated private customers and address particular needs,these solutions can be tailored to the specific needs of policyholders, insuredsor beneficiaries, both in terms of the contract itself and the underlyingfinancial assets. It is, furthermore, a productthat can comprise domestic ormultijurisdictional approaches.
It is idealfor solutions aiming for wealth planning and long-term savings in a suitableand regulated manner, compliant under the applicable legal frameworks andregulations.
Hence, dulyadapted to the specific customer needs and supported by professional legal andtax advice, the exact solution to be achieved, in each specific case, can andshall represent trust and peace of mind, features of any proper long-termfinancial commitment.
The termdedicated fund is, therefore, quite accurate in the sense that the word ‘dedicated’sets the pace for further customization and orientation to the customer needs. Our approach on thesubject and our concept of the product is not of an ‘off-the-shelf’ retail investmentproduct but, in fact, of a custom-made solution that fits the specific needs of an individualperson or his or her family.
We address the topic of meeting customerneeds in two different articles: the topic of the Portuguese legal frameworknon-habitual residency regime is discussed in the article by Espanha eAssociados, whilst the benefits and solutions for high net worth individuals relocating from Brazil to Portugalare the focus of the article by Taiza Ferreira.
Finally, Inge De Wolf addresses the relativestability (now with strengthened professional and information requirementsunder the, recently implemented, insurance distribution directive) of theapplicable legal and regulatory framework.
Everything is in place for thismarket to become increasingly popular to meet the needs of a specific and small– yet significant – set of investors.
Notwithstanding, this type ofinsurance can effectively tackle more than just the needs of high net worthindividuals. It may and shall also be used as a critical instrument to improvethe relationship between companies and human capital.
When an employee negotiates aposition, whether domestic or abroad,commonly the employee will take intoconsideration the full package of thecompany’s compensation and benefits plan. Access to death and disability, aswell as health insurance, pension funds and other incentives may favour oneoffer over another upon selecting a new challenge. Employees value both accessto such benefits, as well as the fact that its continuation should prevail, evenif they embrace a new challenge later on. In such situations, regardless of thetax regime, portability of vested rights comes into play, that is how and wheredo you transfer the vested rights.
In multi-jurisdictional lifeinsurance solutions, portability is the feature that allows one to ‘carry over’ a givenbenefit from one country to another.Specialist advice should be sought after to determine the actual tax and legalregime in the destination country, sothat no personal, professional or family detail is overlooked. For example, one of the main concerns for life insurancepolicy holders is the beneficiary clause.Such clause, if defined properly, allows pay-outs to the designated beneficiaries, regardless of the fact that several jurisdictions are tobe considered.
Some occupations are not in thescope of the Portuguese legal framework non- -habitual residency regime, asmentioned in the second article, butthese type of insurance solutions are superlative due to the portabilityfeature. Professional football players with international careers, to whommulti-jurisdictional solutions are fit for purpose, are living proof of theconcept.
In Europe, two countries rankhigher in the specialization anddevelopment of this insurance subsector.Luxembourg and Ireland have developedmulti-jurisdictional solutions that fitmost legal and regulatory frameworks.
Seven insurance carriers operatingunder the EU Freedom of Services inPortugal are to be considered, some of which include European solutions intheir portfolios. We refer concisely to such solutions in this brief but shallrevert to the subject in the near future, given their potential tocentralise and reduce administrativecosts.
Nuno Leitão
Is senior advisor at MDS, working with individual and corporatecustomers, structuring bespoke unit-linked life insurance solutions.
Before joining MDS, Nuno held the position of sales and distribution manager in asset management companies, thus being awell-rounded professional in devising solutions aimed at high net worthindividuals.
Nuno has a background in communication and holds a specialist course intax law (Portuguese Catholic University, Lisbon).
