Growth of Wealth-Driven Life Insurance Demands Adviser Scrutiny

Private placement life insurance, or PPLI, has moved from a niche strategy to a mainstream wealth planning tool. Its growth has drawn attention from policymakers such as US Sen. Ron Wyden (D-Ore.).

Even so, it has become a core solution for many taxpayers, offering significant tax benefits when properly structured.

PPLI allows investors to hold assets such as hedge funds, private equity, and other alternatives inside a life insurance policy. This can provide tax-deferred or even tax-free growth, along with estate planning benefits such as tax-free death proceeds.

Historically, PPLI was limited to ultra-high-net-worth individuals and closely scrutinized by regulators. Early structures were highly customized, often raising concerns under doctrines like investor control and economic substance.

Today, PPLI has matured into a scalable, institutional-grade solution offered by established insurance carriers. It operates within standard compliance frameworks, uses independent asset managers, and aligns more consistently with regulatory expectations.

Role in Planning

PPLI’s appeal lies in its flexibility. It can support tax-efficient investment growth by allowing assets to compound without current taxation.

It also plays a role in estate liquidity planning, where death benefits can help cover estate taxes. In some jurisdictions, PPLI structures may offer asset protection advantages.

PPLI is used alongside trust planning. It’s often paired with non-grantor or out-of-state trusts, particularly for residents of high-tax states such as California and New York. As those states explore new revenue measures, including wealth tax proposals and limits on traditional planning, these structures have gained traction. As a result, PPLI is no longer peripheral.

Market Growth, Carriers

The expansion of PPLI is reflected in the range of carriers offering these products.

The market is served by a relatively concentrated group of specialized insurers, including Axcelus Financial, Zurich American Life, Prudential, John Hancock, Pacific Life, Crown Global Insurance Group, and Investors Preferred Life. In Europe, Utmost Wealth Solutions has consolidated much of the Luxembourg market.

These carriers operate within established legal frameworks and design policies to comply with key US tax rules, including Internal Revenue Code Sections 7702 and 817(h), as well as the investor control doctrine.

Reliable market size data is limited, but a 2024 Senate Finance Committee investigation identified 3,061 domestic PPLI policies as of year-end 2022, representing $9.5 billion in assets. The market has grown significantly since then. For example, Axcelus alone reported $18 billion in assets under administration by the end of 2025.

The offshore market is harder to quantify but may be substantial. Prior enforcement actions and reporting suggest that offshore PPLI arrangements can involve significant assets, potentially rivaling the domestic market.
Overall, the involvement of large, reputable institutions underscores that much of the PPLI market operates within a defined legal and regulatory structure.

Spectrum of Compliance

The tax treatment of PPLI exists along a spectrum. At one end are well-structured policies that comply with legal requirements. These typically involve independent asset management, proper diversification, and clear separation between the policyholder and investment decisions. In these cases, the intended tax benefits generally are respected.

At the other end are more aggressive structures that push the limits of the rules. These may involve concentrated investments or informal policyholder influence over investment decisions, making them resemble investment accounts more than insurance.

Regulatory scrutiny has focused on these edge cases. The IRS continues to audit PPLI arrangements, particularly around investor control and diversification. However, enforcement has been uneven, in part because PPLI ownership isn’t directly reported on tax returns.

Wyden’s Proposal

Wyden on April 13 reintroduced the Protecting Proper Life Insurance from Abuse Act. The proposal follows an 18-month Senate Finance Committee investigation that characterized PPLI as a “buy, borrow, die” tax strategy used by a small group of ultrawealthy taxpayers.

The data cited in the investigation highlights the narrow scope of the market. At one major carrier, the average PPLI client had income exceeding $7 million and net worth above $100 million. Treasury Department estimates are somewhat lower but still place typical clients firmly in the ultra-high-net-worth category.

The bill would overhaul the tax treatment of certain PPLI structures, classifying policies with fewer than 25 unrelated policyholders in their investment accounts as “private placement contracts.” These contracts would lose the tax benefits of life insurance and instead be taxed annually on a flow-through basis, similar to partnerships.

Distributions, including policy loans and death benefits, would be taxed as ordinary income to the extent they exceed basis. The bill also would impose new reporting requirements on insurers, with steep penalties for noncompliance. It would apply to existing policies, giving policyholders 180 days to restructure or exit.

Revenue estimates vary. The Treasury Department projected roughly $6.9 billion over 10 years for a similar proposal, while independent estimates range from $1 billion to $10 billion depending on design and taxpayer behavior.

The bill’s prospects are uncertain. Industry groups have opposed it, arguing it could undermine the broader tax treatment of life insurance. With current political dynamics in Congress, it is unlikely to pass in its present form. Still, it signals continued policy focus and may lead to increased IRS enforcement under existing law.

Looking Ahead

PPLI occupies a complex position in modern wealth planning. It’s a legitimate, institutionally supported tool with clear applications in tax efficiency, estate planning, and asset protection.

But its use by a small group of ultrawealthy taxpayers has made it a target for policymakers. The latest legislative proposals highlight the tension between acceptable tax planning and perceived abuse.

For practitioners and clients, PPLI remains a viable and often compelling strategy, but it must be implemented thoughtfully. Its future will depend on maintaining compliance with evolving legal standards while navigating increasing regulatory attention.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Joshua Becker is a tax and transactional partner at Pillsbury with over 10 years of international law firm and accounting firm experience.

Robert Amoruso is founder and CEO of Gideon Strategic Partners, a boutique investment advisory firm.

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