Private Placement Life Insurance - Offshore Versus Domestic

Offshore Versus Domestic

While private placement life insurance ("PPLI") (a product also known as insurance wrappers) first developed in the United States, the industry has witnessed significant growth in the placement of PPLI offshore. Offshore insurance companies specializing in PPLI typically offer the product as a financial service for high net worth clients and price their services as a provider, rather than as a traditional insurance carrier. For example, most offshore carriers are prohibited to maintain a domestic sales force; therefore, their products often do not include significant sales loads and commissions. Also, offshore carriers rarely engage in advertising. These reduced marketing costs enable the offshore carrier to provide PPLI to high net worth clients at a significant reduced cost.

The regulatory climate governing life insurance in certain offshore jurisdictions is also not as restrictive as may be found in the United States. Some of the better known jurisdictions to offer the product are Luxembourg, Ireland, Liechtenstein, Singapore and Bermuda. While the lack of plentiful offshore regulation may not be comforting to traditional insurance consumers, high net worth individuals and their advisors are more likely to be able to carefully examine the merits and risks associated with insurance products from offshore carriers. Especially in Europe PPLI offers a lot of tax benefits. In all the European countries where the product is available the product offers at least a tax deferral, and in most European countries there are also substantial income, wealth and inheritance tax benefits. It is therefore that a growing number of financial advisors change existing offshore company, family foundation and trust structures in to PPLI solutions. The product also offers solid asset and investment protection features, which makes the product even more interesting.