Private Placement Variable Life Insurance

Abstract

Private placement variable life insurance offers the investor an opportunity to marry the income and estate tax-efficiencies of life insurance with hedge fund investing, according to the author. Defining variable life insurance, she argues that it allows investors to seek higher investment returns in exchange for assuming the investment risk associated with them. The article reviews tax regulations and discusses the types of contracts that can b purchased. It also points to a few key investment issues that must be considered in constructing the special account portfolio so that the return accruing within these portfolios remain tax-exempt ( or tax-deferred). The article concludes that hedge funds are ideal engines of reinsurance products, to the extent that the tax deferral that variable life insurance policies provide effectively palliates the inherent tax-inefficiency of these strategies.