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.
- Key benefits of ICOLI
01
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.
02
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
03
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.
04
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)
05
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.
- Frequently asked questions
FAQ
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How does icoli work?
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Who does icoli work for?
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are there disadvantages of ICOLI?
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