With the aim of ensuring maximum security for subscribers to Luxembourg life assurance contracts, the law stipulates that assets matching an insurer’s liabilities must be deposited with a bank approved by the insurance industry regulatory authority, the Commissariat aux Assurances (CAA). Each life assurance company is required to sign a depositary agreement with a custodian bank and have this agreement approved by the CAA.
This mechanism, known as the "triangle of security", ensures that the assets matching the insurer’s liabilities are clearly separated from the company’s other assets and lodged in a separate bank account. Client assets are thus legally separated from those of the insurance company’s shareholders and creditors. Furthermore, the custodian bank itself is required to segregate assets and to protect the interests of subscribers to a life assurance contract.
The law of 6th December 1991, as modified, grants subscribers to a Luxembourg life assurance contract the status of first ranking creditor on all assets in the technical reserves. This privilege, which is known as the "super privilege", takes precedence over all other creditors, whoever they are, granting contract holders priority in the recovery of credit related to the execution of their insurance contracts in the event of the insurance company going bankrupt.