Private Placement Insurance

Private placement insurance products occupy a unique place in the spectrum of financial products. While having the same tax benefits, private placement insurance products offer policy structures and investment alternatives not found in traditional retail variable universal life (VUL) and variable annuity (VA) products. Because they can only be offered to individuals who are qualified purchasers and accredited investors, private placement variable universal life (PPVUL) and variable annuities (PPVA) offer high net worth clients access to both investment alternatives and customized product designs that are difficult or impossible to obtain in traditional retail or registered products. They are optimal in their use as a tool to address a multitude of financial, income, and estate tax planning objectives.

Because of its preferential treatment from an income tax perspective, insurance must be properly structured in order to assure it maintains its tax benefits. Clients should work with brokers experienced in structuring policies for high net worth clients and in working with multiple insurers to obtain the most favorable underwriting outcome.
By law, all securities (which include variable insurance products) must be registered with the Securities and Exchange Commission (SEC). However, registration exemptions exist for securities (private placements) offered only to specific qualified purchasers (see Accredited Investor and Qualified Purchaser section).

In the case of investment funds, SEC registration stipulates that shares have sufficient liquidity so that they may be redeemed by shareholders at the current net asset value. This requires investment funds to be valued on a daily basis in order to fulfill redemption requests. Investment funds that do not seek to be registered (exempt funds) with the SEC often do so because they are difficult to value on a daily basis as a result of the types of assets they hold, such as options, derivative contracts, or other investment funds. In addition, exempt funds often engage in investment strategies that are illiquid and therefore require shareholders to remain invested for a certain period of time before they can redeem their shares.

Private Placement Disclosure:

Private Placement Life Insurance is an unregistered securities product and is not subject to the same regulatory requirements as registered variable products. As such, Private Placement Life Insurance should only be presented to accredited investors or qualified purchasers as described by the Securities Act of 1933. Any offer of sale must be proceeded or accompanied by the current offering memorandums for the separate account and completion of the investor qualification questionnaire.

Private Placement Variable life insurance products are long-term investments and may not be suitable for all investors. An investment in Private Placement Variable life is subject to fluctuating values of the underlying investment options and it entails risk, including the possible loss of principal.

Investors should consider the investment objectives, risks, charges and expenses of any Private Placement Variable life insurance policy carefully before investing. This and other important information about any Private Placement Life Insurance is contained in the offering memorandum.

This information has been taken from sources, which we believe to be reliable, but there is no guarantee as to its accuracy. It is not a replacement for carrier illustration. This material is not intended to present an opinion on legal or tax matters. Please consult with your attorney or tax advisor.