The Luxembourg Insurance Commission has published an information note setting out the findings of a 2025 supervisory study on the design and distribution of tax-deductible retirement savings life insurance products under Article 111bis of Luxembourg's income tax law. The review identified weaknesses in product governance, value for money assessments, customer information and distribution controls at both insurers and insurance intermediaries. Insurers have already received injunctions and remediation plans are in progress. On product design, target markets were often defined too broadly, with contracts sold to students without taxable income, impatriates not expected to remain in Luxembourg and customers whose stated objective was to access savings before retirement, even though these products are intended for long-term retirement saving and normally cannot be paid out before age 60 except in limited cases. The authority also found that some insurers treated the tax deduction as compensating for weak performance when testing and reviewing products. Its quantitative analysis of eight life insurers covering about 95% of the market showed materially weaker outcomes for guaranteed-rate products than for unit-linked contracts, with 32% of guaranteed-rate contracts overall in the money compared with 79% for unit-linked and 50% for hybrid products. Precontractual disclosures were also found to be inadequate on tax treatment at maturity, tax consequences for frontier workers and the effect of fees and charges on returns. On distribution, responses from 50 insurance intermediaries pointed to limited implementation of Insurance Distribution Directive and product oversight and governance requirements. Only 40% reported internal procedures for distributing these products, 58% had conflict of interest arrangements, 32% carried out post-sale client follow-up and none reported target-market mismatches to insurers. The Luxembourg Insurance Commission called on insurers to tighten target-market definitions, assess value for money independently of tax benefits, define structured review triggers and improve tax and fee disclosures, while intermediaries are expected to formalize procedures, strengthen training and enhance client monitoring. Further supervisory checks may follow to verify whether the recommendations have been implemented.
Luxembourg Commissariat aux Assurances2026-07-07
Luxembourg Insurance Commission flags value for money and distribution weaknesses in tax-deductible retirement savings life products
The Luxembourg Insurance Commission published findings from a 2025 review of Article 111bis tax-deductible retirement savings life insurance products, identifying weaknesses in target-market design, value for money testing, disclosures and distributor controls. It found some insurers relied on tax benefits to justify weak performance and that guaranteed-rate products lagged unit-linked contracts. Insurers have already received injunctions, with remediation under way and possible further supervisory checks to follow.