LIECHTENSTEIN Trends and Developments Contributed by: Alexander Ospelt, Lukas-Florian Gilhofer, Vivianne Auer and Laura Bayer, Ospelt & Partner Attorneys at Law Ltd
is permitted only as a last resort, where organisational measures cannot adequately protect customer inter- ests. Conflicts of interest must be documented on an ongoing basis, reviewed regularly, and reported to management. Closely linked to conflicts of interest are misguided incentives. Incentives, particularly commissions, are considered detrimental where they risk influencing distribution activities in a manner that is not aligned with the consumer’s best interests. Insurance under- takings and intermediaries must therefore conduct a comprehensive assessment of remuneration struc- tures, taking into account the level of commissions in relation to the value of the product and the service provided to the consumer. High upfront commissions, ongoing portfolio commissions, and target-based incentives – such as dynamic or graduated commis- sions, sales campaigns, or advance payments tied to sales volumes – require particular scrutiny, as they may create strong incentive effects that compromise the quality of advice. Insurance undertakings of insurance-based invest- ment products must also ensure that their distribution strategy aligns with the defined target market. This includes selecting appropriate distribution channels, providing distributors with complete and up-to-date product information, and ensuring that distributors have a sufficient understanding of the product, sup- ported by appropriate training. Manufacturers must monitor distribution activities to ensure compliance with target market requirements and must take prompt corrective action where deviations or consumer detri- ment are identified. Distributors are required to provide feedback to insur- ance undertakings on market developments, includ- ing instances where products appear misaligned with consumer needs or where risks or adverse effects arise during distribution. This feedback is a key element of ongoing product monitoring. Insurance undertak- ings must further ensure that distributor remuneration structures do not conflict with the obligation to act in the consumer’s best interests and that they cooperate only with duly licensed and professionally qualified intermediaries. Ongoing verification of intermediary qualifications and systematic evaluation of customer
complaints relating to advisory quality form an integral part of effective distribution oversight and consumer protection. The FMA’s Expectations for Internal Value Assessments The FMA expects insurance undertakings to proac- tively evaluate their own product portfolios and identi- fy weaknesses in VfM themselves, rather than waiting for regulatory instruction. Insurance undertakings are increasingly expected to prepare formal VfM assess- ments, or equivalent internal analyses. These assess- ments should justify: • the overall cost structure of a product; • the product’s pricing methodology; • commission and distribution costs; • the alignment between expected benefits and actual customer needs, and • the product’s fair treatment of customers across its full lifecycle. The FMA will likely scrutinise these assessments dur- ing supervisory engagements. For products offer- ing investment-linked or savings components, VfM assessments must also evaluate expected returns, the impact of fees over time, and projected surrender values. A key emerging expectation is that insurance under- takings will maintain data-driven monitoring, such as tracking claims statistics, payout ratios, complaints, lapse and persistency trends, and cross-border per- formance differences. Weak customer outcomes in any of these metrics can signal insufficient value. The FMA does not assess governance arrangements on a purely formalistic basis. Rather, it examines whether governance functions are appropriate, ade- quately resourced, and effective in light of the insur- ance undertaking’s nature, scale, and complexity. This proportionate approach ensures that all insurance undertakings – ranging from small cross-border pro- viders to complex, multi-jurisdictional undertakings – implement governance arrangements that are both meaningful and effective.
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