Insurance Company Owned Life Insurance (ICOLI)

Enhance portfolio performance with a capital-efficient investment designed for long-term growth and stability.

What is ICOLI?

ICOLI is an investment strategy used by insurers to enhance after-tax returns on surplus capital.

ICOLI helps insurance companies put capital to work more effectively — optimizing yield while managing reserve requirements. ICOLI policies are owned and managed by the insurance company, with a select group of senior executives serving as the insureds. Insurers can choose from various investment portfolios, with earnings growing tax-deferred and generating monthly bookable income. Upon an insured executive’s passing, tax-free death benefits are paid to the insurance company, providing additional financial stability.

This institutionally priced life insurance solution allows insurers to benefit from tax-deferred growth, lower Risk-Based Capital (RBC) charges, and enhanced asset protection.

Higher Investment Yields & Tax Efficiency

ICOLI offers the potential for higher investment returns due to its tax-advantaged status.
Tax-deferred growth: The cash value of an ICOLI policy grows tax-free if held until death.
No tax-deferred liability is created, making it an efficient long-term asset.

Tax-Free Income & Interest Gains

All gains in the underlying investment funds contribute to increased cash surrender value.
Income sources include:
- Interest income
- Dividend income
- Realized & unrealized capital gains

Financial & Regulatory Advantages

Tax-free death benefits provide economic capital protection.
ICOLI assets are protected via bankruptcy-remote separate accounts.
Recognized as an admitted asset under regulatory guidelines.
Compliance with COLI Best Practices Act (Pension Protection Act of 2006, IRC 101(j)).
Governed by IRS Revenue Procedure 2007-61.

Diverse Investment Strategies

Insurers can allocate funds across various asset classes, including:
- Tax-inefficient assets & assets with high risk-based capital
- Equities and private equity investments
- High RBC charge assets (e.g., Schedule BA assets)

Capital Reserve Optimization

ICOLI can reduce capital reserve requirements:
- 0% RBC charge for life & health insurance companies.
- 5% RBC charge for property and casualty insurers.

FAQ

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How does icoli work?

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Who does icoli work for?

are there disadvantages of ICOLI?