5 Benefits Of Private Placement Life Insurance

By Insurance24

HARARE, Private placement life insurance and annuity programs, commonly referred to as PPLI, have quickly become a favorite strategy among ultra-wealthy investors seeking greater tax efficiency within investment vehicles.

It allows policyholders to combine the strength of premium investment products, such as hedge funds or other alternatives, with the tax-free benefits of life insurance.

“This is a sexy product that people get excited about owning and tell their friends about,” Aaron Hodari, managing director at Schechter, recently told Bloomberg. “It’s an alternative investment that allows you to invest in hedge funds and defer or eliminate taxes.”

Clients put an estimated $3 billion into private placement products last year alone, with Lombard International, a wealth manager based in Luxembourg and Philadelphia, attracting most of that business; but they aren’t the only players. Wealth managers like Lombard rely on firms with complex insurance expertise to handle the structure of the life insurance strategy.

Hodari estimated investors have put upwards of $18 billion into similar funds along with other insurance products for the wealthy, such as private placement annuity contracts.

Specific Benefits Private Placement Life Insurance Offers

So what specifically is drawing people to private placement life insurance and annuity programs? They offer an array of benefits to investors, including:

1. Own tax-inefficient assets in a tax-efficient structure

Private placement life insurance and annuity programs provide ownership of tax-inefficient hedge funds and other alternative investments in a tax-efficient structure. The owner trades short- and long-term capital gain taxation for annual insurance and annuity charges – amounting to significant tax savings.

1. Death benefit proceeds can pass to beneficiaries tax free

Section 7702 of the Internal Revenue Code defines how life insurance contracts are taxed. Death benefit proceeds are received income tax free to the policy beneficiaries. The cash value in life insurance contracts grows on a tax-deferred basis – and if structured properly, both the investment cost basis and gains can be accessed free of income tax.

1. No surrender charges

Unlike retail life insurance and annuity structures, there are no contractual surrender charges. The contract’s cash value can be accessed when needed, subject to the liquidity constraints of the underlying investments.

1. Exposure to a variety of alternative money managers, strategies, and asset classes

Private placement life insurance and annuity contracts have emerged as an attractive medium for exposure to traditionally high-tax, income-producing alternative asset classes. Both life insurance and annuity structures offer tax advantages – accomplishing temporary or permanent tax deferral.

1. Transparent pricing structure

Transparent pricing structure is the concept of telling the client the total fee including the manager and due diligence fee, trading fee and the custodian fee.

Who Is An Ideal Candidate? 

There’s no way to sugarcoat it, you must be exceptionally wealthy to play in the private placement world. Accredited investors or qualified purchasers are required to contribute a minimum of $2 million to a private placement life insurance policy to set it up.

However, you get what you pay for.

With a properly structured private placement policy, clients are able to capture returns without the high tax implications typically associated with hedge fund investments. This equals healthy wealth accumulation for a client’s lifetime, to preserve wealth for their heirs, and to make charitable contributions, if they so choose.

These returns can be accessed tax-free in two ways:

1. Withdrawing up to the investment in the contract.
2. Borrowing funds from the policy.

Funds that are left within the policy for life will never be subject to income taxes and heirs will receive the funds as an income-tax-free death benefit. InsuranceNewsNet

 

Gender pay gap is a risk for businesses, according to Marsh

By Insurance24

HARARE, Workplace issues such as discrimination and harassment have been dominating headlines in recent months, including in the insurance industry, which is in the midst of its own drive to stamp out bad behaviour.

Amid the conversation, the significance of the gender pay gap has been difficult to dismiss. In many industries there are still far fewer women in senior leadership positions than men, and insurance is no exception.

For some, that’s a reflection of wider societal trends and the barriers facing women when it comes to reaching the top of the ladder – factors that will take time to shift. But for businesses today, having a sizeable gender pay gap presents tangible risks, and requires far more urgent attention, according to Marsh.

 

The gender pay reporting regulation has seen UK employers with more than 250 staff required by law to report figures detailing the difference between mean and median pay for men and women in April this year.

That data, thought to be the most comprehensive collected by any country, has revealed some pretty stark results: almost eight in 10 companies and public-sector bodies pay men more than women, with the construction sector and financial services reporting the largest difference.

This week, the Chartered Insurance Institute (CII) released a report which analysed 192 insurers, intermediaries, financial advisors, service providers and loss adjusters in the country, finding a gap of 24% as measured by median hourly difference.

“Without under-playing the urgency of addressing this disparity, the pay gap itself cannot be fixed over-night,” said Tali Shlomo, the CII’s people engagement director. “We must develop good practice in the tools and methods that are effective in addressing the root causes of the gap, and we can start that now.”

But while it will take time to truly address the factors underlying the gender pay gap, companies are facing risks today, says Eleni Petros, employment practices liability insurance practice leader, at Marsh.

Alongside a potential breach of equal pay laws, organisations face risks around both reputational and employer liability.

“It will raise scrutiny. If companies have a massive gender pay gap, I think there will be questions raised by employees as to whether they are being paid the same amount of money as the person next to them,”

Petros told Insurance Business.

“I don’t think companies and boards can afford to leave it as just an HR issue anymore. I think it very much needs to be at the centre of the board’s agenda.”

According to Petros, we could see a rise in claims against employers who publish data revealing a poor gender pay gap.

“Companies need to be preparing now for what the reporting reveals about them,” she said in a Marsh blog. “You should not only carefully review what the results of the reporting figures illustrate about your organisation, but also consider additional diversity initiatives and inclusion policies.

Now is also the time to plan communications with staff and customers in order to deliver the right message that reflects the true position of the organisation.”

Petros added: “Significant gender pay gaps could severely damage your employer brand and company reputation, potentially leading to disgruntled shareholders claiming that senior management failed to properly manage reputational risk.” InsuranceBusiness