PPLI glossary: 45 terms across jurisdictions (English–Chinese)

A variable life insurance policy offered privately, not to the general public, to investors who meet a jurisdiction's wealth or sophistication test. Premiums are credited to a separate or segregated account held with a custodian bank and managed by an investment manager the carrier appoints or approves. The policy value tracks that account; the carrier provides a death benefit and charges fees but does not guarantee investment performance. See the overview.

The annuity counterpart of PPLI: a privately offered contract whose value tracks a custodied investment account, but with no life cover or only minimal life cover. A PPVA may not require medical underwriting and carries few or no cost-of-insurance charges. For US taxpayers, annuity gains are generally taxable, unlike life insurance death proceeds, which are generally excluded from gross income under §101(a).

A life policy whose benefits are expressed in units of one or more funds, so the value rises and falls with those funds. In Luxembourg, according to the ACA, the insurer "guarantees a number of units but does not guarantee a given value". In Singapore, the retail equivalent is the investment-linked policy (ILP), regulated under MAS Notice 307. PPLI in Europe is usually written as a unit-linked policy.

The current market value of the assets credited to the policy's separate or segregated account, after charges have been deducted. It is not guaranteed and changes with the underlying investments, currency movements and fees. The death benefit and the surrender value are usually calculated by reference to the account value, so a fall in markets reduces both unless the contract defines a minimum amount.

The amount the policyholder would receive on surrendering the policy, usually the account value less any surrender charge or outstanding policy loan. For CRS, cash value is the greater of the surrender amount and the amount that can be borrowed, determined without reduction for surrender charges or loans (IRAS CRS e-Tax Guide). Under US §7702 tests the cash surrender value is compared with the net single premium or the death benefit.

The amount payable when the life assured dies, typically the account value plus a stated amount at risk, or a percentage of the account value. For US taxpayers, death proceeds are generally excluded from gross income under §101(a), subject to exceptions such as transfers for value, provided the contract meets §7702 and the account §817(h). Tax in other countries depends on local law.

The difference between the death benefit and the account value: the portion of the payout the carrier funds from its own resources rather than from the policy account. Cost-of-insurance charges are calculated on this amount, using the life assured's age and underwriting class. A larger net amount at risk means more life cover and higher insurance charges; a PPVA has little or none.

The person or entity that owns the policy, pays premiums and holds contractual rights such as surrender, change of investment profile and nomination of beneficiaries. The policyholder can be an individual, a trust or a company. Reporting under CRS and FATCA and tax treatment follow the policyholder's residence, and in some cases the residence of beneficiaries receiving payments.

The person on whose life the policy is written; the death benefit becomes payable on their death. The life assured need not be the policyholder, for example when a trust owns a policy on a family member's life. Medical and financial underwriting is carried out on the life assured, and their age and health determine cost-of-insurance charges.

The licensed life insurer that issues the policy, legally owns the assets in the policy account, pays the death benefit and carries out reporting under CRS and FATCA. A carrier is regulated in its home jurisdiction, for example by the CAA in Luxembourg, the FMA in Liechtenstein or the BMA in Bermuda. Carrier assessment looks at licence, solvency reporting, group ownership and segregation statute.

The bank that holds the assets backing the policy account in custody for the carrier. In Luxembourg, the custody agreement must be approved by the CAA as part of the triangle of security. The custodian's own insolvency is a separate risk: the ACA notes that Luxembourg's 2018 law does not deal with custodian failure, so the custody agreement's terms matter. See carriers and custody.

The firm that makes day-to-day investment decisions for the policy account under a written mandate with the carrier. The policyholder may be able to nominate a manager for the carrier's approval, but must not direct specific investments where US investor-control rules or Irish PPLP rules apply. The manager is typically a licensed asset manager or private bank in its own jurisdiction.

A US term for an account an insurer establishes under state law to hold assets backing variable contracts, kept apart from its general account. Under §817(d), a variable contract allocates amounts to such an account and provides benefits reflecting its investment return. US domestic PPLI invests through separate accounts, which must meet §817(h) diversification.

Under Bermuda's Segregated Accounts Companies Act 2000, "a separate and distinct account" for an identified pool of assets and liabilities, segregated from the company's other assets and liabilities. Section 17 limits a liability attributable to one segregated account to that account's assets, with no recourse to other accounts or the general account, and s.11(4) deems a matching non-recourse term into contracts linked to the account. A company using this statute is a segregated accounts company (SAC).

Cayman structures that divide one company into ring-fenced portfolios. CIMA states that Cayman's PIC legislation "allows for a segregated portfolio company to incorporate one or more of its segregated portfolios", giving a portfolio its own corporate identity. Cayman insurers are licensed under the Insurance Act 2010 as amended; conditions for long-term business should be checked with CIMA.

Luxembourg's arrangement in which a life insurer must keep the assets representing its insurance liabilities distinct from, and managed separately from, its own assets, deposited with a custodian under a CAA-approved custody agreement. The ACA states that it is neither a state guarantee nor a capital guarantee. It protects against insurer failure, not market losses. See Luxembourg.

The Luxembourg rule under which policyholder claims rank "in priority to all other creditors of the insurance company" in respect of the assets representing their policies, as clarified by the law of 10 August 2018. For unit-linked contracts, if segregated assets are insufficient, each policyholder's reimbursement is reduced proportionately, and policies linked to unlisted assets may be settled in kind (ACA, 2019-02-25).

Luxembourg's insurance supervisor. It licenses and supervises insurers, approves custody agreements under the triangle of security and issues the investment rules for unit-linked policies. Circular Letter 26/1, published on 28 January 2026, governs policies concluded on or after 1 February 2026, while Circular Letter 15/3 continues to apply to earlier policies (as reported by CMS Luxembourg, 2026-02-09).

The classification used in Luxembourg's unit-linked investment rules to match asset choice to the policyholder's wealth and sophistication: class N for retail policyholders and classes A to D for non-retail policyholders, defined by asset and premium criteria. Law-firm briefings on Circular Letter 26/1 report that the classification was largely retained and that internal collective funds may be set up for classes A to D without prior notification. Refer to the CAA circular for thresholds.

Liechtenstein's integrated financial regulator, which licenses insurers and intermediaries and applies Solvency II. The FMA reported insurance-sector premium income of CHF 4.90 billion in 2025 and a solvency ratio of 189% (2026-05-22). These figures cover the whole insurance sector, not only life or PPLI business.

Under Article 79 of Liechtenstein's Insurance Contract Act (VersVG, as amended in 2020), if the policyholder's spouse, registered partner or descendants are beneficiaries and have not refused, they step into the contract in place of the policyholder when enforcement is levied against the policyholder or bankruptcy proceedings are opened. Article 81 adds a buy-out right against reimbursement of the surrender value. Article 77, by contrast, makes a designation lapse on attachment or bankruptcy opened in Liechtenstein; recognition of foreign proceedings is a question for counsel, and creditors may still bring voidable-transfer challenges.

The right of an insurer authorised in one European Economic Area state to write business in other EEA states, either through freedom to provide services or freedom of establishment, after notification rather than a new licence. Luxembourg, Liechtenstein and Irish carriers use passporting to issue unit-linked policies to residents of other EEA states, where local consumer and tax rules continue to apply.

Bermuda's Insurance Act 1978 classifies long-term (life and annuity) insurers. Class C covers insurers with total assets under $250 million, Class D from $250 million to under $500 million and Class E over $500 million, excluding long-term segregated account assets (amounts as stated in the Act, consolidated to December 2022). The minimum solvency margin for each class is set by BMA rules; refer to the BMA's current requirements rather than older summaries.

In Singapore, an individual meeting SFA s4A tests: net personal assets exceeding S$2 million (primary residence counted up to S$1 million), net financial assets exceeding S$1 million, or income in the preceding 12 months of at least S$300,000, who expressly opts in. In the US, the SEC test is net worth over US$1 million excluding primary residence or income over US$200,000 (US$300,000 joint). Status alone does not establish suitability.

Singapore's scheme, administered by SDIC, that protects policyowners if a member insurer fails. Cover is capped at S$500,000 of aggregated guaranteed sum assured and S$100,000 of aggregated guaranteed surrender value per life assured per insurer. SDIC states that investment-linked policies with benefits directly tied to the value of underlying net assets are not covered, which generally excludes PPLI account values.

A premium paid by transferring existing assets, such as listed securities or fund units, into the policy account instead of cash. Acceptance depends on the carrier's eligible-asset rules, valuation and the custodian's ability to hold the asset. The transfer may be a taxable disposal in the policyholder's country of residence, and assets the family manages raise investor-control questions for US taxpayers.

A collective investment fund available to investors generally, such as a UCITS or other regulated fund, that a unit-linked policy can link to. Luxembourg's rules set conditions on which external funds each policyholder class can access. For US taxpayers, Revenue Ruling 2003-92 indicates that publicly available partnership interests held in a variable contract are treated as owned by the holder.

A fund created inside a Luxembourg insurer's books and shared by several policyholders, managed by an investment manager the insurer appoints. Under Circular Letter 26/1, briefings report that insurers may set up internal collective funds for non-retail policyholder classes A to D without prior notification to the CAA. The French abbreviation FIC stands for fonds interne collectif.

A Luxembourg internal fund dedicated to a single policy or policyholder, managed by an investment manager under a mandate within the policyholder's chosen risk profile. The French abbreviation FID stands for fonds interne dédié. A dedicated fund allows customisation, but the policyholder must not direct specific investments where investor-control or personal portfolio rules apply. See investment flexibility.

A US fund whose interests are available only to insurance company separate accounts and certain other permitted holders, not to the general public. Under the §817(h)(4) look-through rule, a separate account can test the IDF's underlying assets for diversification rather than treating the fund as one investment. IDFs are the main investment vehicle in US domestic PPLI.

The US rule that a variable contract is not treated as life insurance or an annuity for any period in which its separate account is inadequately diversified. Treasury Regulation §1.817-5 limits any one investment to 55% of account assets, any two to 70%, any three to 80% and any four to 90%. Failure can make the policy's income taxable to the holder.

The US tax principle that a policyholder with sufficient control over separate-account assets is treated as owning them, so account income is taxed to the policyholder. Revenue Ruling 2003-91 describes a holder who "cannot select or recommend particular investments or investment strategies". Webber v. Commissioner (2015) applied the doctrine where instructions were relayed informally to the manager.

The US definition of life insurance for tax purposes. A contract must be life insurance under applicable law and pass either the cash value accumulation test, or the guideline premium requirements together with the cash value corridor. A contract that fails is not treated as life insurance, so its inside build-up and death proceeds lose the treatment that applies to qualifying policies.

One of the two §7702 tests. Under §7702(b)(1), "the cash surrender value of such contract may not at any time exceed the net single premium" required to fund the contract's future benefits. Interest-rate assumptions for the test changed for contracts issued after 31 December 2020 under Public Law 116-260. The carrier's actuaries run the test throughout the life of the policy.

The alternative §7702 test. Premiums paid may not at any time exceed the guideline premium limitation, and the death benefit must at all times be at least a set percentage of the cash surrender value. That percentage is 250% at attained age 40 or below and declines with age, reaching 100% at age 95. Both conditions must be met.

Under §7702A, a life insurance contract entered into on or after 21 June 1988 that fails the 7-pay test, because premiums in the first seven contract years exceed those needed to pay up future benefits with seven level annual premiums. A MEC remains life insurance, but lifetime withdrawals and loans receive different, generally less favourable, tax treatment.

An election under the US Internal Revenue Code by which a foreign insurer that is a controlled foreign corporation (using a 25% ownership test), would qualify for insurance-company treatment, and meets Treasury requirements is treated as a US domestic corporation, waiving treaty benefits. Some Bermuda and Cayman carriers serving US clients make it. It does not replace §7702 or §817(h).

A US federal excise tax on premiums paid to foreign insurers that are not treated as domestic. For life insurance, sickness and accident policies and annuity contracts the rate is 1 cent per dollar of premium (1%), reported on Form 720 as IRS No. 30 (Rev. June 2026). A claimed treaty exemption must be disclosed under §6114.

A US investor category under the Investment Company Act, 15 USC 80a-2(a)(51): for individuals, a person who owns not less than US$5 million in investments; for certain investment managers, a person who invests not less than US$25 million on a discretionary basis. Insurance-dedicated funds relying on the corresponding exemption often require it, so US domestic PPLI often targets qualified purchasers.

The OECD standard for automatic exchange of financial account information between tax authorities. Life insurers issuing cash value insurance contracts are reporting financial institutions. CRS has no de minimis threshold for individual cash value insurance contracts; its US$250,000 threshold applies to pre-existing entity accounts (IRAS CRS e-Tax Guide, 5th ed., 2026-08-11). Singapore has exchanged since September 2018 and expects first exchanges under the amended CRS in 2028. See tax compliance.

Under US FATCA regulations (26 CFR §1.1471-5), an insurer issuing cash value insurance or annuity contracts is a specified insurance company. A cash value insurance contract has an aggregate cash value above US$50,000 at any time in the calendar year, a level PPLI policies exceed in practice; institutions may also elect to report smaller contracts. Singapore and the US signed a reciprocal Model 1 IGA in 2018; Singapore's FATCA Regulations 2020 giving effect to it apply from 1 January 2021 (IRAS).

The Report of Foreign Bank and Financial Accounts (FinCEN Form 114) that US persons file when the aggregate value of their foreign financial accounts exceeded US$10,000 at any time in the year. FinCEN's instructions state that a financial account includes an insurance policy with a cash value, so a US person's interest in an offshore PPLI policy may be reportable.

Under section 730BA of Ireland's Taxes Consolidation Act 1997, a policy whose benefits depend on property that may be or was selected by, or influenced by, the policyholder or a connected person. For Irish-resident policyholders, PPLP gains are taxed at 60%, or 80% if not correctly returned (Revenue guidance on s730K), compared with the standard exit-tax rate on life policies.

The OECD Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures, published on 9 March 2018. Where adopted, intermediaries and service providers must disclose arrangements designed to circumvent CRS reporting, generally within 30 days. The rules are not specific to insurance, but arrangements using insurance wrappers to avoid reporting may fall within them.

Source of wealth explains how a person accumulated their overall assets, such as business sale, employment or inheritance; source of funds identifies where the specific money or assets used for a premium came from. Carriers, custodians and managers verify both under anti-money laundering rules before accepting a policy, and gaps in documentation are a common cause of delay in the process.