On 10 April 2015, the Princely Supreme Court of Liechtenstein issued a groundbreaking decision against SwissLife (Liechtenstein) AG, a Liechtenstein-based insurance company. The duties of an insurance company regarding the distribution and the administration of unit-linked life insurance policies according to Liechtenstein law are thereby clarified once and for all.
The defendant, SwissLife AG, distributed unit-linked life insurance policies via a structured sales network of agents and sub-agents. The “fund” which was the actual underlying centerpiece of those life insurance policies was a SwissSelect guarantee bond. The German claimant was interested in a safe and conservative investment for her retirement.
The agents of SwissLife, for whom the insurance company is responsible, recommended the claimant, represented by Schwärzler Attorneys at Law in Liechtenstein, to purchase said life insurance policy including a Lombard loan as a comprehensive package. By the means of this Lombard loan, part of the insurance premiums was “leveraged”. The claimant was made believe that the return would be much higher than the interest rate of the Lombard loan.
The agents used advertising brochures in which security, guarantees and a low volatility were emphasised. In charts and tables, the seemingly outstanding profits/returns from the past were highlighted. In reality however, the entire construct was highly risky and was not even able to cover its own, horrendous costs. For the claimant, the investment has been a complete loss in the end, not only did she lose her entire equity capital, but she was also confronted with claims by the financing bank.
The Princely Supreme Court now ruled in favour of the claimant and determined that from an economic viewpoint, unit-linked life insurance policies are generally comparable with direct investments since the insurance holder bears the risk of loss of the investment in a cover fund. Therefore, the insurance company is obliged to provide both, information and thorough consultation.
As a result, SwissLife was held liable for the entire loss suffered by the claimant. This groundbreaking decision is not only precedent for a multitude of parallel cases of mainly German insurance holders pending before Liechtenstein courts, but from now on also generally requires insurance companies to carefully examine their agents and investment managers as well as the funds that they suggest to their clients. This is a decision for the benefit of insurance customers.
Dr. Alexander Amann, LL.M (UCLA)
Schwärzler Attorneys at Law
Feldkircherstrasse 15, FL-9494 Schaan
Tel: 00423 239 85 40