🇱🇺Insurance Wrapper Jurisdictions: Where to Issue a Unit-Linked or PPLI Policy

The decision

An insurance wrapper is a life policy whose value is a portfolio: a unit-linked contract or, at the private-placement end, a PPLI policy holding a dedicated fund built for one client. Two laws govern it at once, and they are almost never the same law. The country of the insurer decides what happens to the assets if the insurer fails, who holds them, and what investments the policy may carry. The country where the policyholder and the beneficiaries live decides whether the wrapper defers tax at all, what a surrender costs, and whether the death benefit sits inside or outside the estate.

The practical question is therefore a pairing: which issuing jurisdiction, for a family resident where. A Luxembourg policy that works perfectly for a Paris resident can be taxed every year as if it did not exist once the same family moves to Madrid or Munich, and a Bermuda policy built for a US person means nothing to a French notary. How the policy is used in estate planning is covered in Life Insurance as a Succession Tool; the US mechanics of PPLI — §7702, §817(h), investor control — are in PPLI. This page lines up the issuing jurisdictions against each other, then the residence rules, and then the combinations.

What rules a jurisdiction out

Four filters remove options before any comparison of features.

1. The residence country's anti-wrapper rule. Germany, Spain and the United Kingdom each have a statutory test that looks through a policy whose holder can steer the investments. If the policy fails it, the choice of insurer is irrelevant because the tax deferral is gone.
2. Distribution rights. An EU or EEA insurer sells into another member state under the freedom to provide services; an insurer in Bermuda, the Cayman Islands, Hong Kong or Singapore has no such passport into the European market. For a European family the realistic field is Luxembourg, Ireland and Liechtenstein, with the Isle of Man and Guernsey serving the British and expatriate market.
3. The US person test. A US citizen or resident needs a policy that is life insurance under §7702 and whose insurer is either a US taxpayer through a §953(d) election or bears the 1% federal excise tax on premiums. That points to US carriers or to Bermuda and Cayman companies built for the purpose, and to little else.
4. Minimum ticket. A dedicated fund exists in Luxembourg only above published wealth and premium thresholds, and PPLI proper starts in the low millions. Below roughly €250,000 of premium the choice is between collective unit-linked funds, not between jurisdictions.

Issuing jurisdictions compared

The table compares the nine jurisdictions that issue most cross-border wrappers on what protects the policyholder: who supervises the insurer, how the assets backing the policy are held, where the policyholder ranks if the insurer fails, whether a compensation scheme stands behind the policy, and whether the policy is protected from the policyholder's own creditors.

Read across the columns and the nine collapse into three models. The first protects the policyholder by title: Luxembourg segregates the assets at a custodian bank chosen with the insurer's regulator in the loop, and article 118 of the law of 7 December 2015 gives insurance claims priority over those assets once the prescribed inventory or mortgage-registration condition is met; a shortfall claim against the insurer has the separate ranking and exceptions of article 119, while Guernsey reaches a similar result through a standard licence condition that requires a long-term insurer to appoint an independent Guernsey-based trustee holding at least 90% of the assets representing policyholder liabilities, as the GFSC sets out. The Insurance Business (Bailiwick of Guernsey) Law, 2002 keeps long-term business in a separate fund whose assets may be applied only to that business's claims and expenses, save an established surplus (ss. 42–43). In a winding up, section 75 of the Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020 keeps that fund for long-term liabilities, save any excess, and since 25 April 2023 policyholder claims against a licensed insurer, other than a category 5 insurer under the Insurance Business (Solvency) Rules, 2021, have been preferred debts under section 1(1)(d) of the Preferred Debts (Guernsey) Law, 1983: they rank after a landlord's secured rent and employee wage and payroll-deduction debts and ahead of all other debts, including for any shortfall in the long-term fund. The second protects by ranking: inside the EEA article 275 of Solvency II makes insurance claims take precedence over other claims in a winding-up, either absolutely over the assets representing technical provisions or ahead of everything except employees, tax, social security and secured rights; Bermuda does the same by statute: under sections 36 and 36A of the Insurance Act 1978 insurance debts are paid after employee and statutory preferential debts and in priority to all other debts, and a long-term insurer's fund is applied first to its long-term business. The third protects by a fund: the Isle of Man scheme provides for 90% of liabilities under protected contracts of an insolvent participating insurer, funded by insurer levies. Regulation 9(2) permits the scheme manager to defer, reduce or extinguish amounts payable if its fund is or is likely to be insufficient (Life Assurance (Compensation of Policyholders) Regulations 1991); and Singapore's Policy Owners' Protection Scheme, run by the deposit insurer SDIC, covers only the guaranteed benefits of a policy — the non-guaranteed investment component of a unit-linked contract falls outside it. Hong Kong has none yet: the government is still drafting the legislation for a Policy Holders' Protection Scheme on the consultation conclusions of December 2023.

The creditor column is the one most often skipped. Protection from the insurer's creditors says nothing about the policyholder's creditors, and only two places write that second protection into statute. Under the Liechtenstein Versicherungsvertragsgesetz a claim under a policy with an irrevocable beneficiary designation is not subject to enforcement by the policyholder's creditors (art. 77(2)), and where the spouse or descendants are beneficiaries neither the beneficiary's nor the policyholder's claim is subject to enforcement or to the policyholder's bankruptcy (art. 78). Singapore's trust nomination under section 132 of the Insurance Act 1966 (formerly section 49L) is available in favour of a spouse and/or children, subject to the statutory conditions. Section 132(4) excludes the policy moneys from the policy owner's estate and debts; under section 132(5), creditors can recover from the policy moneys an amount equal to premiums paid if the policy was effected and premiums paid with intent to defraud them. The nomination procedure is prescribed in regulation 4 and Form 1. Elsewhere the answer depends on the general insolvency and fraudulent-transfer law of the forum where a creditor sues.

The dedicated-fund column matters for anyone above the retail ticket. In Luxembourg the Commissariat aux Assurances ties the investment freedom of a policy to the wealth of the policyholder. Circular letter 26/1, in force for contracts issued from 1 February 2026, keeps the five categories of 15/3: category N with no minimum; A from €125,000 invested across the insurer's contracts and €250,000 of movable wealth; B from €250,000 and €500,000; C from €250,000 and €1,250,000; D from €1,000,000 and €2,500,000. A dedicated internal fund (fonds interne dédié) is a single-manager fund backing a single contract with no guaranteed return, and its assets sit in one account at one custodian; a specialised insurance fund (fonds d'assurance spécialisé) is the single-contract fund built from the insurer's permitted list rather than by a mandated manager. The circular also opens collective funds of categories A to D to depositary flexibility previously reserved for dedicated funds, and admits certain structured products.

What the residence country does with the wrapper

The issuing jurisdiction decides safety; the residence country decides tax. Six regimes cover most of the families that use cross-border wrappers.

Three of the six have written a look-through rule aimed squarely at the private-placement model. Germany's is the most precise: under §20(1) no. 6 sentence 5 EStG a contract with a separately managed portfolio assembled for that contract, not limited to publicly distributed investment funds or index-tracking assets, and in which the beneficial owner can decide directly or indirectly on sales and reinvestment, is a vermögensverwaltender Versicherungsvertrag — the income reaching the insurer is attributed to the beneficial owner as it arises, and none of the insurance rules apply. Spain gets to the same place from the other side: article 14.2.h LIRPF imputes the annual change in value to the policyholder of any unit-linked contract unless the holder has no power to change the investments, or the reserves are invested in predetermined collective investment schemes or in separate asset pools chosen by the insurer, where the holder may only pick among pools. The United Kingdom taxes a personal portfolio bond — a policy under which the holder can select the property — on a deemed gain of 15% a year of premiums and prior deemed gains under section 522 ITTOIA 2005, on top of the ordinary chargeable-event regime.

France and Italy are the permissive pair. French assurance-vie is a national savings product, and a Luxembourg contract taxed under French rules sits comfortably inside it: a dedicated fund is common, the gain share of a surrender is taxed under article 125-0 A CGI — the rules distinguish premiums paid by 26 September 2017 from those paid from 27 September 2017. For the latter, after eight years the final flat-rate income tax is apportioned between 7.5% and 12.8% using the €150,000 aggregate outstanding-premium threshold; the €4,600 / €9,200 annual allowance, the option for progressive taxation and social levies must be considered separately, as the tax administration restates it — and the death benefit follows its own schedule outside the succession. Italy taxes the yield at payout and keeps the death benefit outside the estate. In both, the wrapper's value is highest; in both, the practical cost of a foreign contract is compliance: a French resident declares the foreign contract on form 3916-3916-bis and must check how withholding and final tax are handled for that foreign contract, and an Italian resident checks both RW reporting and IVAFE. The general IVAFE rate for financial products is 0.20%, rising to 0.40% for products held in the specified preferential-tax jurisdictions, apportioned to ownership and time held. The RW instructions provide exceptions where the foreign insurer applies Italian substitute tax and stamp duty or an Italian intermediary handles all investment, divestment and income flows; the actual arrangement must therefore be checked (RW instructions, Redditi PF 2026).

The United States is a closed system: the policy must satisfy American definitions wherever it is issued, which is why the Bermuda and Cayman rows exist at all. The US rules are covered in PPLI.

Matching the profile to the jurisdiction

The table rests on one asymmetry: the issuing jurisdiction can be chosen once, the residence changes. A family that expects to move should test the policy against the rules of the next country as well as the current one — the German and Spanish look-through tests and the British personal portfolio bond regime all apply from the first year of residence, to contracts written long before. A policy that passes all three is less flexible, and for a mobile family that is usually the right price. What happens to a trust holding the policy on the same move is set out in Relocating with a Trust.

Cost, timing and a worked example

Pricing is set contract by contract and is not published as a tariff. The market description in the PPLI article — total annual charges on the order of 0.5–1% of assets plus set-up costs — is an estimate, and a dedicated fund adds the custodian's and the manager's fees on top of the insurer's. Timing is dominated by the custodian's onboarding and the insurer's source-of-wealth review, not by the regulator: a Luxembourg dedicated fund is not notified to the Commissariat in advance contract by contract, but the tripartite custody arrangement has to be in place before the first premium is invested.

The French death benefit shows what the wrapper buys where the residence rules favour it. A parent pays €5,000,000 of premiums before age 70 into a Luxembourg contract; at death it is worth €8,000,000 and passes in equal shares to two children. Under article 990 I each child has an allowance of €152,500 on a €4,000,000 share, leaving €3,847,500: €700,000 of it at 20% (€140,000) and the remaining €3,147,500 at 31.25% (€983,594), so €1,123,594 per child and €2,247,188 in total. Had the same €8,000,000 been held directly, each child would take €4,000,000 on the scale of article 777 CGI after the €100,000 allowance, for about €1,517,394 each and €3,034,789 together. The difference is roughly €787,600, and it exists only because the family is French-resident; the identical contract held by a German resident would have been taxed on its income every year if it failed the sentence-5 test.

Typical mistakes

• Choosing the insurer for its jurisdiction and ignoring the residence test. A Luxembourg dedicated fund with switching rights is ideal for a French resident and fails in Germany and Spain.
• Confusing insurer protection with creditor protection. The triangle of security protects against the insurer's failure. Protection against the policyholder's own creditors comes from a statute such as the Liechtenstein VersVG or a Singapore trust nomination, and only if designated in time.
• Assuming the policy is invisible. A cash-value insurance contract is a financial account under CRS; the insurer reports it to the policyholder's residence like a bank account.
• Managing the portfolio by e-mail. Investor control in the United States, the German sentence-5 test and the British personal portfolio bond rules all turn on what the holder can in fact direct, and correspondence is evidence.
• Buying outside the distribution perimeter. A policy sold to an EU resident by a non-EU insurer without authorisation creates regulatory problems for the insurer and evidential problems for the holder.