“A clear majority of those surveyed believe the Luxembourg life insurance market will continue to grow. The regulatory and economic environment in Luxembourg remains a key driver for maintaining its continued success,” said Yohann Niddam (left), managing partner, and Inge De Wolf (right), partner at Périclès Luxembourg, in a press statement. Photos: Périclès; Montage: Maison Moderne

“A clear majority of those surveyed believe the Luxembourg life insurance market will continue to grow. The regulatory and economic environment in Luxembourg remains a key driver for maintaining its continued success,” said Yohann Niddam (left), managing partner, and Inge De Wolf (right), partner at Périclès Luxembourg, in a press statement. Photos: Périclès; Montage: Maison Moderne

Luxembourg’s life insurance market is growing, with €222bn in assets, strengthened by enhanced capital protection, and increasingly focused on service quality and cost concerns, found a recent Périclès survey.

Luxembourg’s life insurance market thrives on regulatory stability and diverse investment options, but evolving customer needs and distributor objections highlight the need for adaptation. These were some of the key takeaways from Périclès’ fourth survey on the life insurance market, published on Wednesday 20 November 2024. Yohann Niddam, managing partner, and Inge De Wolf, partner at Périclès Luxembourg, presented a detailed analysis of European private banks, independent financial advisers (IFAs) and family offices’ perceptions of Luxembourg’s life insurance landscape. Périclès Group is a Luxembourg-based advisory and consulting firm specialising in wealth management and private banking, with particular expertise in Luxembourg’s life insurance market.

Conducted biennially since 2015, the 2024 survey highlights key trends, challenges, and opportunities within the industry. Drawing on 130 responses from a pool of 1,000 targeted distributors across France, Italy, Switzerland, Belgium and Luxembourg, the survey offers valuable insights into the current state and future direction of the market.

Market growth

The survey underscored the robust growth trajectory of Luxembourg’s life insurance sector. Assets under administration for life insurance in Luxembourg have quadrupled over the past 15 years and doubled in the last decade. In 2023, these assets reached €222bn, marking a 2.2% increase from the previous year. Distributors widely expect the market to continue expanding over the next three years, citing Luxembourg’s regulatory and economic environment as crucial drivers of this growth.

Competitive advantages

Distributors identified several distinguishing features of Luxembourg life insurance compared to local alternatives. Enhanced capital protection emerged as the foremost advantage for the first time since 2017. Additionally, the flexibility of underlying investment options, such as collective internal funds (Fics), dedicated internal funds (Fids) and specialised insurance fund (Fas), remained highly valued, particularly in France and Italy. The ability to include direct securities and access to dedicated internal funds were also frequently cited as key strengths.

Luxembourg’s AAA and regulatory stability further reinforced its appeal, with French and Belgian distributors showing the strongest preference for Luxembourg policies, recommending them in nearly 90% of cases.

Emerging challenges

While the Luxembourg market’s appeal is broadening, the survey noted a rise in objections from potential clients. Compared to previous years, cost-related concerns, particularly minimum investment amounts, posed significant barriers, especially among IFAs. Belgian distributors highlighted economic conditions as a top concern, while service quality issues were most prominent for multi-family offices and independent brokers. Despite these challenges, regulatory concerns, such as privacy rules and professional secrecy, were rarely mentioned as drawbacks.

Customer Segmentation

The survey revealed a balance between clients with “new money” and “old money” investing in Luxembourg life insurance policies. Luxembourg and France attracted more customers with new wealth, whereas Italian and Swiss markets leaned towards established wealth. Asset management firms and multi-family offices tended to cater to new money clients, while IFAs and independent brokers primarily served old money investors.

Service quality and digitalisation

Service quality, a critical factor in distributor satisfaction, showed mixed results. While service standards in Luxembourg were perceived as stable over the past 12 months, they were still regarded as inferior to 2017 levels. Italian and Belgian distributors reported improvements, contrasting with Luxembourg-based distributors who noted a decline within their ecosystem. Digital services were deemed important or very important by the majority of respondents, reflecting the evolving expectations of distributors.

Outlook

Distributors expressed confidence in the continued growth of Luxembourg’s life insurance market, despite challenges such as political and economic changes across Europe. To sustain momentum, respondents suggested measures including adjusting minimum investment thresholds and refining investment rules, particularly for key markets like France and Italy.

The survey also examined Luxembourg’s competition with other jurisdictions. While Luxembourg remained the preferred choice for most distributors, Italians showed an openness to Irish policies, and Swiss distributors displayed greater diversification, mentioning jurisdictions such as Barbados and Seychelles.

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