There are a number of excellent attributes associated with having Private Placement Life Insurance (PPLI).

This type of insurance (PPLI) has become one of the most reliable, preferred, solid and safe wealth planning solutions.

A well-designed PPLI provides solutions for:

(i)     Asset protection
(ii)    Estate and Succession Planning
(iii)   Financial Planning
(iv)   Tax efficiency
(v)    Security and
(vi)  Preservation of wealth.

Barbados, as a preferred jurisdiction for the insurance business, facilitates the use of the PPLI for non-Barbados residents so that they can enjoy the benefits of a Life Insurance under a favorable tax-compliant regime.

In addition, a well-designed PPLI structure will deliver excellent financial, tax and estate planning results with simplicity and efficiency. However, it is not strange to find clients, families and advisors who are skeptical about the great benefits of this solution due to past experiences with traditional life insurance products.

We have seen cases where families are not very well advised by their professional advisors who are so attached to old-fashioned wealth planning structures. They typically assume that this type of solution is only designed for ultra- rich families or that it is too good to be true, without knowing how it works, the ecosystem involved, and the benefits it can provide.

A successful PPLI project requires coordinated work among all parties involved in the Ecosystem:

(i)    The client/family
(ii)   The legal/tax/financial advisors
(iii)  The PPLI advisor/distributor
(iv)  The family office
(v)   The custodian bank
(vi)  The external asset managers
(vii) The Insurance Company

The purpose of this document is to provide some clarity regarding the ecosystem of players surrounding a PPLI project and how they play a significant role in the design, implementation, and maintenance of the structure.

The insurance-based planning solutions for wealth affluent clients have been further developed and used in countries such as US, Canada, UK. There are other markets such as Latin America, Asia, and parts of Europe in which the use of PPLI solutions has been growing due to its advantages and benefits. This solution is now a compelling alternative available to family offices and professional advisors who are seeking a robust yet flexible wealth planning solution instead of a “cookie cutter” solution.

We at Amphora Life work closely with the families and their wealth, insurance, financial, tax, legal advisors, and family offices to ensure that their needs are met and covered by a safe, simple, and efficient wealth planning structure.

Amphora Life Insurance Company Ltd, part of Amphora Financial Group, is a reputable Life Insurance Company regulated and licensed in Barbados with the knowledge, experience, and regulatory capacity to act as Carrier in any PPLI project for families around the world.

The PPLI Cycle

Every PPLI project has at least six main stages that we at Amphora Life consider are key to the success of the structure, and each player of the Ecosystem plays a critical role in each of these stages:

• Choosing a trusted wealth- planning advisor and a reliable and independent PPLI distributor.
• Determining the assets to be allocated as premium and the structure to hold the PPLI.
• Choosing an experienced, independent, and reliable insurance company.
• Selecting the family member or members to be insured, the insured amount and beneficiaries.
• Selecting the custodian bank (or keeping the existing one) for traditional assets.
• Selecting Advisor. the Investment

1. Trusted Advisor and PPLI Distributor

A PPLI project usually starts from one or more specific needs of a client, including:

(i)     Protect his/her assets against claims from third parties,
(ii)    Set up a succession planning structure to easily transfer the assets to his/her beneficiaries when passing,
(iii)  Achieve tax efficiencies on the protected assets,
(iv)  Diversify its investments.

Normally, these needs are communicated to the client´s trusted advisors who come together to propose an achievable wealth planning solution. This solution is the result of a diligent and professional analysis by lawyers, tax and financial advisors.

Once the advisors and the clients decide that a PPLI can fit the specific needs, the next step is to involve the PPLI distributor/advisor whose expertise is to provide a detailed and professional analysis of how the PPLI works, the different alternatives, the best structure to be used, etc.

The PPLI distributor/advisor must have access to the best options of PPLI carriers in the market that can provide a tailor-made PPLI solution to the client.

At this stage of the process, it is critical that the advisors and the PPLI distributors act with independence to ensure that the client can receive the best available options of Carriers in the market under the most favorable conditions.

We at Amphora Life partner with recognized, trusted, and independent PPLI distributors and advisors across the globe who share our ambition to create tailored, innovative, compliant, and efficient life insurance solution for every client.

2. Assets to be allocated as premium and the structure to hold the PPLI

PPLI structures can be funded with traditional or non-traditional assets. At this point of the process, the family and the advisors decide which assets are going to be allocated to the PPLI structure.

Here, the job of the advisors and PPLI distributors is to categorize the assets as traditional or non- traditional so that when selecting the insurance company (next step), the insurance company confirms the required process to receive the assets as payment of premium.

If traditional assets are utilized, it is important that the PPLI distributors verify with the Insurance Company the list of the approved custodian banks, and the requirements to set up a relationship with the client’s preferred custodian bank in the event there is no pre-existing relationship between the Insurance Company and the custodian bank where the assets are deposited.

With respect to the structure to hold the PPLI, this must be determined on a case-by-case basis depending on the needs of the family, the profile of the client and who has the ownership of the assets to be contributed to the PPLI.

A PPLI structure can be as simple or as complex as the client needs.

Professional advisors tend to recommend the use of trust structures to own PPLI. Recently, we have seen increased use of U.S. law trusts (i.e., South Dakota, Nevada, Florida, etc.) as policyholder and beneficiary of the PPLI to provide a higher level of asset protection. Other trust structures use an underlying corporate entity as policyholder and the trust as beneficiary.

There are other more complex structures implemented to satisfy the needs of the clients. For instance, a trust as policyholder holding shares of a Private Investment Company (PIC) carrying out private equity activities, mergers, acquisition, etc.

3. The Insurance Company

In the PPLI industry, there are many options of insurance companies, and like any other professional industry, the largest company is not necessarily the best one. The decision to select the insurance company must be made on a case-by-case analysis and considering different variables.

To determine which would be the best insurance company for a client, the advisors and PPLI distributors must act independently and evaluate different options from different carriers. Important considerations include:

• Financial Solvency
• Asset Protection (segregated accounts)
• Customized Solutions
• Competitive Rates
• Flexibility
• Reinsurance Capacity
• Independence

Another important consideration is the jurisdiction where the Insurance Company is based and the advantages that this jurisdiction can offer. In the case of Amphora Life, the company is based in Barbados, which is a jurisdiction that is considered one of the top insurance jurisdictions due to its political stability, reputation, asset protection & insurance legislation and tax treaty network.

At Amphora Life, we work very hard at helping our clients, their advisors and our business partners in the implementation of solid, reliable, efficient and bespoke PPLI structures.

This dedication is what has allowed us to maintain and grow our network of business partners and PPLI distributors, who see in Amphora Life and its people a trusted insurance company for their clients.

In sum, it is essential that the parties involved (i.e., family, advisors, PPLI distributors, etc.) find an insurance carrier that can really meet the client´s needs.

4. Insured Person(s) and Insured Amount

Under a classic life insurance policy, the person who built the wealth is the insured and his close relatives are the beneficiaries.

Depending on the planning objectives, there can be multiple lives insured and the death benefit payable on the last-to-die. This can significantly reduce the cost of insurance and defer the recognition of policy gains over a longer period. Multiple lives are often used in cases where the wealth creator has a health condition that makes him or her uninsurable.

In Canadian, U.S. and other cases where a large amount of insurance coverage is required and reinsurance capacity is a challenge, multiple policies, where each insures the life of a different family member, can be a solution.

With respect to the insured amount, advisors recommend having this as small as allowed by law to minimize the cost of insurance while allowing the cash value of the policy to ultimately drive death benefit.

The higher the insured amount the higher the cost of insurance, so it is the role of the PPLI advisors/brokers together with the tax advisor to determine the minimum amount of insurance coverage that must be included in the PPLI structure to be tax compliant.

Once defined the insured amount has been determined, the PPLI advisor/broker guides the family during the whole underwriting process, including the preparation of the insurance application, medical examinations (for large coverages), and gathering KYC documentation in respect of the policyholder and beneficiaries.

5. Custodian Bank for traditional assets

When the assets contributed to a PPLI structure are traditional assets, a dedicated account is opened by the Insurance Company at the custodian bank selected by the policyholder. Assets are thereafter transferred to the new account held by the Insurance Company.

The client has the ability to select the investment policy and the investment manager of the assets held in the policy. The client may select an investment manager with whom he has an existing relationship.

Most custodian banks and asset management firms are familiar with the management of PPLI investments The interaction between the investment manager, the custodian bank and the insurance company are coordinated to the benefit of the policyholders and beneficiaries.

As stated in Point 1, it is important that the insurance company has an extensive list of approved custodian banks to receive the portfolio of investments in a smooth and efficient way.

If the client´s preferred custodian is not in that list, the insurance company must initiate the opening of an account with such custodian as soon as the client confirms the acceptance of the terms and conditions of the life insurance contract.

At Amphora Life we have an extensive list of approved custodian/investment banks and are constantly adding new ones to ensure our policyholders retain the existing relationships with their custodian banks, investment advisors, and in general with all preexisting parties involved in advising the family.

6. Investment Advisorfor Non-Traditional Assets

A PPLI structure can include Non- Traditional Assets (NTA) – i.e., private equity, venture capital, real estate, distressed securities, etc., The NTA can be contributed to the PPLI by way of premium and thereafter enjoy the benefits that this structure can offer in terms of asset protection, tax efficiency, succession planning and wealth preservation.

The NTA are normally managed by an investment advisor or committee designated by the client.

Although the Insurance Company can grant the discretionary mandate to the Investment Advisor or Committee, advisors must ensure that such discretion is compliant with any applicable regulation in the jurisdiction of the policyholder and location of the assets to avoid any negative effect on the PPLI structure.

Conclusion

Every PPLI Project requires coordinated work by all participants in the Ecosystem where the family is the focus and all efforts and capacities must point in that direction. Therefore, it is very important that each participant perfectly understands his or her role.

As affluent families are looking for more efficient and secure wealth- planning solutions, advisors must have a good knowledge of innovative solutions such as PPLI.

Unfortunately, PPLI is sometimes ignored because of a lack of understanding of how it works and its benefits.

A correctly orchestrated PPLI solution requires a detailed and judicious case-by-case analysis done by a professional team of advisors who work together to achieve a coordinated implementation of the structure so that the benefits of PPLI can materialize from the beginning.

We at Amphora Life enjoy working with prominent wealth planners, professional advisors, and financial institutions to insure the lives of their clients and protect, preserve, and transfer their wealth to future generations.