Structured savings instruments (hereinafter «ICAE») are essentially life insurance contracts (which means they have a protection component in case of death or disability of the insured) and correspond to financial instruments that, although they take the legal form of an already existing original instrument (banking, insurance, or securities market), have characteristics that are not directly identifiable with those of the original instrument, due to the fact that they are associated with other instruments whose evolution depends, in whole or in part, on their profitability, with the investment risk being assumed, even if only in part, by the policyholder.

This means that we are dealing with variable capital life insurance where the amount to be received by the beneficiary depends, in whole or in part, on a reference value constituted by one or more participation units. One example of ICAE is insurance linked to investment funds, also known as Unit Linked.

Unlike traditional life insurance, where the amount to be received is fixed, ICAE offers a return that can rise or fall, depending on the performance of the investment fund. Indeed, the investor should bear in mind that there is a direct and immediate relationship between potential risk and expected return: the higher the risk, the higher the profitability; the lower the risk, the lower the return.

We can find three distinct types within these products:

• Guaranteed capital products: there is an express guarantee of the invested capital, which is typically given at the maturity of the product and is ensured by the insurance company that markets it;
• Non-guaranteed capital products: the value depends solely on the evolution of the price of a set of assets that make up the structure. In these cases, there is a risk of loss (partial or total) of the capital, however, the expectation of profitability is also higher.
• Partially guaranteed capital products: this option provides a guarantee of only part of the capital but allows for a bit more risk to obtain a higher return. This type of product targets investors who are more risk-averse, thus being an intermediate solution between the previous two.

It is important to mention that, although it is an investment product, it is still an insurance contract, and the Legal Regime of the Insurance Contract provides for certain additional information elements that must be included in the policy and result from the fact that the profitability of this insurance linked to investment funds depends on the evolution of the assets to which it is associated. These additional information elements are as follows:

• The constitution of a reference value.
• The rights of the policyholder in the event of the liquidation of an investment fund or the elimination of an account unit before the end of the contract.
• The form of information on the evolution of the reference value, as well as its regularity.
• The conditions for the liquidation of the redemption value and the insured amounts, whether in cash or in the securities resulting from the operation of the contract.
• The frequency of information to be provided to the policyholder about the composition of the investment portfolio.

Contracting this type of insurance product can be an excellent way to make savings profitable, however, the risk tolerance inherent to each specific investor should always be considered.

Belzuz Abogados S.L.P. – Branch in Portugal has a multidisciplinary team with extensive experience in the analysis, review, and adaptation of contractual documentation inherent to insurance products, particularly in the context of investment products based on insurance and can be an important aid in placing this type of product on the market. At the same time, the team of lawyers from the Insurance Law Department can also advise potential investors who wish to contract these products, particularly in negotiating them with insurance companies.