The Fundamentals of Insurance Company Owned Life Insurance (“ICOLI”)

According to statutory filings, North American insurance companies own more than thirty-billion dollars of institutional life insurance. This Article explores the basic attributes of ICOLI, the applicable tax and regulatory structure, the available investments, the process to acquire ICOLI and how insurance companies deploy this strategy to outpace yield earned on traditional investments.

Is ICOLI Worth the Effort?

Insurance company owned life insurance (ICOLI) can provide an increase in retained yield on a given investment. Usually, the pickup is more than +150bps per year.

Basic Taxation for ICOLI

ICOLI can provide improvements to your investment returns, but how is this asset treated for tax purposes? ICOLI Taxation ICOLI is a tax-preferred asset. (See IRC secs. 7702, 72(e), and 101(j)) Taxation Investment into the contract…

Basic Accounting for ICOLI

ICOLI can provide improvements to your investment returns, but how do you handle this asset on your books? ICOLI Accounting ICOLI accounting is straight forward. GAAP Reporting ICOLI surrender value is reported as an “Other Asset” …