How are life insurance funds invested? - AFSA publishes draft regulation. In case of liquidation, the insured person moves to another fund
The Financial Supervisory Authority has issued for public consultation the draft regulation "On life insurance related to participation in collective investment undertakings with public offering", which sets out the procedures that insurance companies and citizens must follow to invest life insurance money in government securities through investment funds.
The life insurance premium related to participation in investment funds, which is paid by the insured or the contractor, consists of the life insurance premium, i.e. the amount of insurance money used to cover the insurance event in the event of the death or survival of the insured, consists of the investment premium, i.e. the part of the insurance money used to purchase units in investment funds approved by the Financial Supervisory Authority, and operating expenses, i.e. the part of the insurance premium that includes the brokerage commission, as well as other administrative expenses.
The insurance company is obliged to invest the investment premiums to purchase units in investment funds approved by the Financial Supervisory Authority.
The insurance company is obliged to notify the insured regarding the number of units purchased, the purchase price of the investment fund unit and the costs for this transaction, for each purchase from the investment portfolio.
But what happens to the money invested if the insurance company closes its operations?
In the event of a merger or liquidation of an investment fund, the insurance company must give the insured the opportunity to switch to another fund, managed by the same management company, or to switch to another fund managed by another company.
The costs related to the transfer are borne by the insurance company. In the event that the insured does not agree to switch to another investment fund, the insurance company will pay the insured the value of the investment portfolio without applying an exit commission and will return the unused portion of the insurance premium.
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