Thomas Vonrueti of Swiss Life explains the growing role and relevance of life insurance for high net worth individuals as part of their wealth planning.

Date: Jun 2011

Tags: Insurance, Protection, Wealth planning

• For HNW individuals, life insurance forms part of the overall wealth planning concept to address estate planning and succession planning needs, as well as tax optimisation in a broader context
• Proper structuring to segregate company assets and personal assets is possible through life insurance
• Private placement life insurance is an innovation which allows clients to create a personalised portfolio within the insurance plan, as well as choose death coverage in terms of the level and also the currency

In contrary to retail and affluent clients, where event-driven savings and the protection of risks are the main drivers for life insurance, for high net worth (HNW) individuals, Thomas Vonrueti said in an interview that life insurance forms part of the overall wealth planning concept.

This addresses estate planning and succession planning needs, as well as tax optimisation in a broader context, he explained.

In these areas, there is a broader application of life insurance beyond just liquidity provision, said Vonrueti, as well as new solutions for clients.

Separating company and personal assets

According to Vonrueti, given the large number of entrepreneurs in Asia, and therefore private companies, there is a risk that negative scenarios for these companies can affect the private lives of the business owners.

As a result, it is critical to do proper structuring to segregate company assets and personal assets – for which he said there is a role for life insurance in combination with other instruments such as trusts and foundations.

Innovations in life insurance

A key innovation in the life insurance space has been the introduction of private placement life insurance (PPLI) in Asia, said Vonrueti.

This concept has been successful in the US and Europe previously, and over recent years has gained traction in this region as a result of the transparency and flexibility of the product, enabling it to be tailored to the needs of HNW individuals.

Another innovation, added Vonrueti, has been the way in which solutions can be adjusted in a way to deliver local tax benefits, helping clients used such products for estate planning or pre-immigration planning, for example.

PPLI explained

PPLI is essentially an investment-linked insurance policy, explained Vonrueti, with two key differences from those available in the insurance market.

First, he said, it has more flexibility in terms of investments, allowing clients to select the private bank and asset manager they want to work with, to create a personalised portfolio within the insurance plan.

The second aspect, he said, is the ability to choose death coverage in terms of the level and also the currency.

This currency advantage is important given that the majority of HNW clients use the US dollar as their main reference currency for life insurance coverage.

Yet for clients in Asia, and especially in Singapore, whose liabilities are largely in a local currency, they might prefer to choose a Singapore-dollar coverage to avoid creating an FX exposure which might not be necessary.