Private Placement Variable Life Insurance
Private placement variable life insurance, when combined with nontraditional investment options such as hedge fund strategies, represents a unique insurance solution for high net worth and corporate clients who expect institutional pricing and seek alternative investment options on a tax-favored basis.
Private placement insurance products occupy a unique place in the spectrum of financial products. Private Placement Variable Universal Life Insurance (PPVUL) maintains the same basic structure as traditional variable life insurance, including separate account protection, state regulated policy forms, and tax qualification. However, upon meeting certain requirements that limit the purchase of private placement products to specific types of purchasers, PPVUL is exempt from registration under the Securities Act of 1933 and regulation under the Investment Company Act of 1940.
Securities Act of 1933 In order to qualify for exemption from registration under the Securities Act of 1933, a private placement product must meet the following requirements:
- Purchasers qualify as Accredited Investors
- Limitations on advertising/general solicitation
- Resale limitations
- Disclosure of information
Investment Company Act of 1940 In order for the investment accounts in a private placement product to qualify for exemption from registration under the Investment Company Act of 1940, the following requirements must be met:
Less than 100 beneficial owners (Section 3(c)(1))
Offered only to Qualified Purchasers (Section 3(c)(7))
Since private placement products are not subject to strict regulatory limitations, a great degree of flexibility is allowed in designing these products for the high net worth investor. An opportunity exists to take advantage of investment alternatives not available in traditional life insurance products.
The distinctive combination of private placement variable life insurance and hedge fund investments creates a unique insurance solution for a select marketplace.
Private Placement Variable Life Insurance with Alternative Investments
The following are benefits to the high net worth investor who is combining private placement variable life insurance with hedge fund strategies:
- Efficient transfer of wealth to the next generation
- Tax-deferred growth
- Tax-free withdrawals
- Income-tax-free death benefits
- Access to multiple nontraditional investment managers
- Separate account protection
- Investment program flexibility
- Net amount at risk reinsured by a consortium of the largest reinsurers in the industry
- Cost efficiencies derived from ability to amortize acquisition costs
- Institutional versus retail pricing
- Ability to rebalance portfolio without taxation
- No K-1 statements generated
- Advanced policy design
A Private Placement Life Insurance (PPLI) Account is an unregistered securities product and is not subject to the same regulatory requirements as registered products. As such, a PPLI Account should only be presented to accredited investors or qualified purchasers as described by the Securities Act of 1933.