Unit-linked policies beyond the insurance paradigm: structure of obligations, investment services and coherence of the EU regulatory framework

Abstract

This article examines the nature and the cause of unit-linked insurance policies, focusing on risk allocation as the decisive criterion for denying their classification as insurance contracts and confirming their financial nature. In particular, it proposes a functional decomposition of the insurer’s obligations, by identifying the performance of two distinct investment services by the insurer, one consisting in a portfolio management activity and the other in a proprietary trading activity, the latter exhibiting structural features analogous to those of OTC financial derivatives. The analysis extends to the European regulatory framework, contrasting the CJEU’s formalistic approach with the programmatic indications of MiFID II and the Insurance Distribution Directive, both of which advocate a level playing field in investor protection for insurance-based investment products and traditional financial instruments, in an effort to mitigate the risk of regulatory arbitrage.