Insure securely

Why location matters

Insurance is meant to protect people against risks: at work, in everyday life, in retirement provision. For providers to truly deliver this protection, they need a location with stable and reliable conditions.

A secure financial centre convinces at home and abroad through transparency, clarity and resilience to crises. The points below show what this means in detail and why these factors play a central role for fund-linked policies in particular.

1. Sovereign creditworthiness

A country's creditworthiness indicates how likely it is to meet its financial obligations in future. The higher the creditworthiness, the more likely that is. For maximum creditworthiness, countries receive an AAA rating from rating agencies (including Standard & Poor's). Among the few AAA countries (Germany among them), only one is completely debt-free: Liechtenstein.

Why it matters for fund-linked policies: sovereign creditworthiness stands for financial stability, and with it for the long-term security of client contracts.

2. A high degree of legal certainty

A financial centre is only secure if there are rules that all market participants follow. These include, for example, capital requirements for companies that ensure they remain financially able to act. All rules and obligations are supervised by independent authorities such as BaFin (in Germany) and the FMA (in Liechtenstein).

Why it matters for fund-linked policies: comprehensive regulation helps ensure that companies can deliver, and it creates trust.

3. No liability for others

For financially strong EU states such as Germany, the euro rescue fund represents a systemic risk: if weaker EU states slide into a debt crisis, the other members share liability and have to provide financial aid. Such transnational liability mechanisms do not apply to countries outside the EU, such as Liechtenstein, Switzerland and, since Brexit, the United Kingdom.

Why it matters for fund-linked policies: without external obligations, the regional capital market is less vulnerable to crises.

4. Political and economic stability

Political continuity and a strong economy are the guarantors of a functioning overall system. Germany may be Europe's leading economic power, but lean states such as Switzerland have a competitive edge. The situation is particularly stable in Liechtenstein, where the national accounts have closed with a surplus every year since 2014, with one exception: in 2022, a negative financial result led to a loss of CHF 203 million. In addition, GDP per capita is more than three times as high as in Germany.

Why it matters for fund-linked policies: the better the structural conditions, the more secure long-term contracts are.

5. Transparent exchange of information

Various international standards aim to make financial markets transparent. One of them is the Common Reporting Standard (CRS) for the exchange of financial information. All members of the European Economic Area (EEA) are required to transpose these standards into national law. As an early adopter of the automatic exchange of information, Liechtenstein is one of the countries that implemented the CRS particularly quickly and consistently.

Why it matters for fund-linked policies: a transparent location strengthens client trust, especially in cross-border distribution.

6. Protected segregated assets

A key security feature of long-term investments is the legal separation between the provider's assets and the client's assets. When the contract balance is invested in funds, it is ideally treated, as in Liechtenstein, as legally protected segregated assets. In the event of insolvency, it therefore remains beyond the reach of third parties and is clearly assigned to the client in law.

Why it matters for fund-linked policies: legally protected segregated assets safeguard the invested capital if the worst happens.

7. Data and cyber security

A secure financial centre protects data as well as capital, from health data and contract details to financial information. To improve data security in the financial sector, Liechtenstein's act implementing the EU regulation DORA (Digital Operational Resilience Act) has applied since 1 February 2025, barely two weeks after the regulation took effect in the EU on 17 January 2025.

Why it matters for fund-linked policies: processing sensitive client data digitally requires the highest security standards.

Conclusion: fund-linked policies are only as secure as their environment

Anyone who invests in funds for retirement should look beyond returns and costs to where the provider is based. Legal, political, economic and technological conditions can influence how secure and future-proof a policy is over the long term. The criteria above should therefore be taken into account in the investment decision, and they can make the difference in a client conversation.

Article published by Prosperity Solutions AG