I haven’t found a thread on this topic, so perhaps it’s time to bring it into existence and start a light chat about investment insurance policies.
When you purchase an investment insurance policy, you enter into a contract with an insurance company.
The investments are not directly in your name; instead, they are on the insurance company’s balance sheet, but the insurance contract grants you the right to the returns and value of the savings.
This means that the insurance company is the counterparty, and if it goes bankrupt, the question arises: what happens to the insurance savings and when, if ever, will they be received?
In Finland, life insurance policies fall under the scope of the Insurance Companies’ Guarantee Fund (Vakuutusyhtiöiden vakuusrahasto), whose task is to safeguard the interests of policyholders if the company is unable to fulfill its obligations.
This protection applies to Finnish companies, such as OP-Life Assurance Ltd, Nordea Life Assurance Finland Ltd, Mandatum Life, etc.
If a company operates in Finland as a branch of a foreign EEA company (e.g., Nordnet Livsforsikring AS, Finnish branch), it falls under the insurance system of its home country (in this case, Norway).
In Norway, the Guarantee Scheme for Non-life Insurance (Garantiordningen for skadeforsikring) operates, but it apparently does not cover life insurance (livsforsikring) in the same way as in Finland — meaning that for Nordnet’s policies, the guarantee protection is likely weaker than with a Finnish company.
Nordnet itself states the following on its website: “What happens if Nordnet Liv is insolvent?
The investor is protected in the event that Nordnet Liv goes bankrupt or becomes subject to enforcement proceedings. Nordnet Liv is obliged to make such provisions that it can fulfill its commitments. The protection means that the investor has a preferential right to these provisions in enforcement and bankruptcy situations. The amount of the preferential right is not limited. An investor who has taken out insurance from Nordnet Liv automatically receives a preferential right, which is valid in the event that Nordnet Liv is declared bankrupt or becomes subject to enforcement.”
Perhaps the matter is in order - always?
In an investment insurance policy, assets are usually segregated from the insurance company’s other balance sheet, but this depends on the contract structure:
Unit-linked assets must, by law, be kept separate from the insurance company’s own assets.
They are thus client assets that are not used to pay the company’s own debts.
In practice, this would mean that even if the company went bankrupt, these assets could be transferred to another insurance company, and investments are generally not lost — but the transfer might take time, and liquidity risk exists.
As is well known, any - indeed, any - company can fail - for example, in Finland in the early 1990s, several large banks would have collapsed had the state not intervened.
Diversifying across several insurance companies is probably a rational risk management measure, especially if the capital is large, wouldn’t you agree? What if, for some reason, “such provisions that it can fulfill its commitments” had not been made in these risky global times. If the assets are insufficient to cover all policies, you would apparently suffer a loss proportional to the missing portion. Preferential right grants priority, but apparently no guarantee of full compensation.
The probability that, for example, Nordnet Liv would go bankrupt is likely very small.
The company operates under the supervision of Finansinspektionen (the Norwegian supervisory authority).
From this, one can analyze income statements and balance sheets:
However, in larger crisis scenarios, such as the 2008 financial crisis, the structures and situations of insurance balance sheets can become, let’s say, “confused,” and then it matters in which country the legislation and security mechanism are located, and whether there is sufficient diversification of assets across different actors and countries.