Life policies, not all companies are alike: how to evaluate them

When deciding to entrust one’s savings to an insurance company, it is important to carefully evaluate its financial solidity. Octium Group’s experts explained us which indicators to pay attention to.

“The recent events that have affected the insurance sector in Italy, especially the life insurance one, have raised some doubts among clients and consultants about the reliability of private insurance instruments. To avoid being overwhelmed by emotions and thus making rash decisions, it is possible to take a look at some key indicators for assessing the seriousness and financial solidity of an insurance company. “”Before putting your own savings into a life insurance company,”” explains Francesco Camerlingo, Group Head of Sales & Business Development at Octium, “”it is necessary to check its reliability and financial strength. In fact, private insurance provides long-term financial solutions that often form the cornerstone of wealth and succession planning strategies.”” Let’s analyze the most important parameters.

The Solvency Capital Requirement (SCR Ratio)

A first data point to focus on is the Solvency Capital Requirement (SCR Ratio), introduced by the Solvency II Directive. This indicator is a key parameter for assessing the solidity of an insurance company. “”Each institution,”” explains Camerlingo, “”must hold a solvency margin to ensure that its assets are sufficient to cover its obligations towards its clients. The solvency margin has been identified to fulfill a precise goal: allowing companies to accumulate the necessary resources for fulfilling their commitments to policyholders, even in stressful situations, therefore limiting defaults in the sector to one every 200 years.””

More in depth the SCR Ratio is the ratio between own funds and the solvency capital requirement on a certain date. The own funds are determined according to the valuation of the company’s balance sheet at market values (or Fair Value). The SCR ratio, instead, takes into account the underlying risks of the business following the parameters determined by Solvency II. The minimum SCR Ratio is 100%: this means that the higher the ratio of an individual company is, the more solid it can be considered. “”In particular, the two companies of the Octium Group, Octium Life Dac (in Ireland) and Octium Assurance AG (in the Principality of Liechtenstein with a branch in Italy), present a SCR Ratio of 229% and 229.54%, respectively.””

The Country System

Even the most solid insurance companies may be affected by the effects of economic and political crises affecting a particular country. “”For this reason,”” the expert continues, “”an additional element to consider when choosing a private insurance life policy is the stability of the country’s system in which the insurer operates, primarily from a regulatory perspective. Octium Group, for example, considered strategic offering its Italian clients life unit-linked policies developed by its companies in Ireland and the Principality of Liechtenstein with a branch in Italy.””

Octium’s choice was not random: the Principality of Liechtenstein stands out for its utmost political and economic stability, as certified by of Standard & Poor’s “AAA” rating. Moreover, the Principality is member of the European Economic Area and has adopted the entire European Union insurance legislation, including the Solvency II Directive.

Ireland also enjoys a consolidated jurisdiction and one of the strictest insurance regulations within the Union, representing its largest insurance hub. The country has implemented the strictest version of the EU directive on insurance liquidation, according to which if the event occurs the claims and demands of policyholders against the company have absolute priority over any other one.

The Insurer’s Expertise

Finally, to fully assess the reliability and solidity of an insurance company, it is necessary to evaluate its professionalism and long-term results. It is the very nature of unit-linked life policies that requires it, because of both their long-term horizon and their complexity from a financial, legal, and tax perspective.

“”Our group manages over EUR 8.5 billion euros and can boast more than twenty years of experience in distributing cross-border life solutions. With a team of over 80 professionals present in five countries (Dublin, Vaduz, Luxembourg, Zurich, and Milan), we serve over 4,500 clients. Finally, thanks to a team of consultants dedicated to the Italian market, we are perfectly capable of providing constant and lasting support to our Italian clients and partners”” concludes Camerlingo.”

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