Protect your life with compliant structured products
After suffering a significant financial loss related to an investment in structured products, a female investor is questioning whether the investments offered by her insurer comply with regulations.
In 2006, Ms. U, a loyal customer, purchased a unit-linked life insurance policy through her broker. She invested 143,000 euros in the policy, primarily in structured financial products indexed to a basket of stocks and listed on a recognized foreign stock exchange.
The Conflict
Ten years later, in 2016, Ms. U decided to surrender her policy. However, she received only 22,000 euros, resulting in a significant loss. She then accused the insurer of failing to fulfill its duty to provide advice by offering products she considered unsuitable for a life insurance policy. She filed a lawsuit, hoping to obtain compensation.
According to her arguments, the structured products in question did not meet the liquidity and tradability requirements set forth in the Insurance Code. Furthermore, she asserts that the insurer failed in its duty to provide information and advice.
To be eligible as investment units, assets must be included on a list established by decree and meet strict liquidity criteria. This means they must be readily tradable on a regulated market.
The Court of Appeals' Analysis
The Court of Appeals concluded that the financial products in question met the required standards. It based its ruling on the fact that these assets were listed on a recognized foreign stock exchange within the European Economic Area, thereby satisfying the criteria for liquidity and tradability established by Articles L. 131-1 and R. 332-2 of the Insurance Code.
Ms. U is challenging this decision and has brought the case before the Court of Cassation. She argues that the mere listing of a security on an exchange does not guarantee its actual liquidity, due to an insufficient volume of transactions.
The Verdict of the Court of Cassation
The Court of Cassation dismissed Ms. U’s appeal and upheld the decision of the Court of Appeals. It noted that, in accordance with the Insurance Code, unit-linked products are deemed eligible as long as they are admitted to a recognized market, which implies that they are tradable.
In this case, the structured products, being listed on an approved foreign stock exchange, met these requirements. Consequently, the Court concluded that the insurer did not fail to fulfill its obligations by offering these investment vehicles.
To purchase this type of product—as with all savings products—it’s essential to consult with your wealth management advisor beforehand to get the right advice.
