Insurance Company Owned Life Insurance

What is ICOLI?

Insurance Company Owned Life Insurance (ICOLI) is a specialized, tax-efficient investment vehicle used by insurance companies to optimize risk-adjusted returns while reducing capital reserve requirements. This institutionally priced life insurance solution allows insurers to benefit from tax-deferred growth, lower Risk-Based Capital (RBC) charges, and enhanced asset protection.

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.

Key Benefits of ICOLI

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.

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.

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.

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

Is ICOLI Right for Your Insurance Company?

ICOLI is a powerful financial tool for insurance companies seeking tax-efficient asset growth and optimized capital reserves. Understanding how ICOLI aligns with your firm’s investment strategy is essential for helping increase returns and regulatory compliance.

Explore how ICOLI can fit into your insurance company’s investment portfolio. Contact Us to learn more.