CBFA - Crise financière - Informations utiles

1. Over the past few years, investments in life settlement contracts have been offered in Belgium¹.

Life settlement contracts or viatical settlements are contracts in which the client acquires a right to claims on insurers in the event of the death of an insured. The return which the investor receives depends on the point at which the insured dies.

The advertising and sale of these products has increased considerably in recent years. The CBFA wishes therefore to draw the attention of the public to the following points.

2. The CBFA has examined a number of these life settlement contracts², which give the investor a share in a fund that itself has acquired the rights arising from a life insurance contract entered into with an American life insurance company. The CBFA has come to the conclusion that the products examined are not life insurance products but should be considered investment instruments³.

From the cases examined, the CBFA determined that total value per investor and per offer amounts to more than EUR 50,000. Given this minimum required investment, offerors of such a product in Belgium are exempt from the obligation to submit a draft prospectus for advance approval by the CBFA. In accordance with European legislation, the CBFA does not supervise either the information provided or the offering of such products under the terms of the prospectus law.

Moreover, intermediaries who offer such investment instruments do not need to be registered with the CBFA. The public must be mindful of the fact that if an insurance intermediary or an intermediary in banking and financial services offers such a life settlement, their activity of intermediation is not governed by the legislation on insurance intermediation or on intermediation in banking and financial services that lays down specific information obligations and codes of conduct.

3. Because of the nature of the instruments offered, a correct estimate of the risks these represent for a private investor is far from straightforward.

The CBFA recommends that intermediaries who distribute such products to the public should clearly inform the latter of the associated risks, even if the provision of information or of services concerning these products does not fall within the scope of the CBFA’s direct supervision.

Finally, the CBFA advises investors to invest only in products whose risks they can adequately estimate and whose characteristics are suited to their investor profile.

⁽¹⁾For further information, see the 2007 Report of the CBFA Management Committee, p. 81 and the 2008-2009 Report of the Management Committee, p.74.

⁽²⁾The CBFA likewise has no competence to determine whether these instruments comply with the provisions of Belgian law, in so far as supervision of these provisions does not fall within its legal mandate. The possibility cannot be excluded, therefore, that certain investment instruments may be contrary to the provisions of the Civil Code as regards public policy.

⁽³⁾Within the meaning of Article 4, § 1, 3° or 10°, of the Law of 16 June 2006 on public offers of investment instruments and admission of investment instruments to trading on regulated markets. It should be noted that such products can be offered in the form of a class 23 insurance contract. In that case, the offeror must be an authorized insurance company and the intermediaries that distribute such products must be registered as insurance intermediaries.

Anyone wishing more generally to enquire as to the regularity of any transaction proposed can find further information on the "Consumer Protection" page of the CBFA web site (www.cbfa.be) or by contacting the “Protection of Consumers of Financial Services” Department (telephone: +32 2 220 59 10; e‑mail address: peri@cbfa.be).