LC 26/1 from CAA

New Circular Letter 26/1 from CAA

What this means for you, Brokers

The CAA has published Circular 26/1, which came into force on 1 February 2026

This text replaces LC 15/3 and sets out the investment rules applicable to unit-linked life insurance products.

Beyond the technical changes, this new circular has a direct operational impact on brokers.

Here are the key points to remember.

1️. Target market and needs analysis: heightened vigilance

The CAA explicitly reiterates its expectations regarding Product Oversight Governance (POG)

In practical terms, for you:

The analysis of the client’s requirements must be formalised, consistent and documented.
The level of complexity of the product must be assessed in advance.
The more complex a product is (particularly in the case of structured products), the more granular and precisely defined the target market must be.
It is recommended that a negative target market be defined — and this is mandatory for certain structured products.

=>You must be able to demonstrate consistency between:

the client’s financial profile,
his investment horizon,
their risk tolerance,
and the product on offer.

Document traceability remains a key issue.

2️. Structured products: open to investment but subject to strict regulation

Big news: the option to invest directly in structured products

The circular distinguishes between:

structured products with enhanced guarantees,
structured products without enhanced guarantees

What this means is:

Checking the issuer’s credit rating.
Compliance with investment limits per contract.
Explicit consent from the client in the event of indirect exposure to alternative funds.
Certain customer profiles (e.g. category N) are prohibited from accessing certain products linked to reference rates.

=>For you:
This broadens the range of options but increases your educational responsibility.
The explanation of the mechanisms and risks must be clear, in writing and kept on file.

3️. Internal Collective Funds (A, B, C, D): greater flexibility

The text enhances the appeal of FIC A/B/C/D

These funds retain their collective nature but benefit from:

operational simplification,
greater flexibility,
and a position midway between FIC N and Dedicated Internal Funds.

=>For brokers:
You now have access to a more sophisticated solution for high-net-worth clients, without necessarily having to switch to a discretionary investment fund.
This presents a business opportunity, but it requires:

a good understanding of the categories of policyholders (A, B, C, D)
a check on the declared level of assets,
strict adherence to the limits.

4️. Protection for alternative and property funds

Before investing in:

alternative funds,
alternative funds of funds,
property funds,

the client’s explicit consent is required, following the provision of a specific risk disclosure statement

=>This implies:

proof of delivery,
countersigned document,
to be kept on file.

The logic is clear: sophistication equals greater transparency.

5️. Customer information: increased requirements

The circular sets out in detail the information to be provided:

investment policy,
performance record
risk profile,
redemption terms,
access to prospectuses or KIDs

=>For brokers:
Contractual and pre-contractual documentation must be consistent and complete.
Disclosure obligations are more than just a formality: they must be verifiable.

Key takeaways for your practice

– More investment opportunities (structured products, FIC A/B/C/D).
– Greater flexibility for high-net-worth clients.
– But there is a growing demand for greater traceability, consistency and justification of advice.

LC 26/1 aims to maintain the competitiveness of the Luxembourg sector whilst strengthening protection for policyholders

APCAL Recommendation

We invite our members to:

Review their processes for analysing needs and identifying target markets.
Check that their sales materials are consistent.
Raise awareness amongst their teams regarding the new rules applicable to structured products.
Update their distribution system (POG).

Finally, the APCAL reminds its members that they must provide a statement confirming that the product being sold is suitable for the policyholder’s needs and requirements.
This obligation goes beyond the purely financial aspects of the contract: it remains essential to understand the product as a whole, including the underlying investments that make it up.

With regard to any switching from one investment vehicle to another, the APCAL also draws attention to Article 9.7 of EU Regulation 2017/ 2359 POG, which requires intermediaries to “also obtain the necessary information on the client’s existing underlying investment assets and on the new investment assets recommended, and to carry out an analysis of the expected costs and benefits of this change so as to be able to reasonably demonstrate that the expected benefits outweigh the costs.”