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Understanding
investment opportunities

With offshore insurance companies

This chapter introduces the types of investments offered by offshore insurance companies.

Speak to a financial adviser to find out more about investing with offshore insurance companies.

What is an offshore insurance company?

These are companies that are based outside of the country from which they accept business. Typically, these companies are based in an international financial centre, such as the Isle of Man, and are registered and regulated there.

The Isle of Man, Ireland and Luxembourg are some of the best known offshore centres for financial services companies. Other centres include Gibraltar, Guernsey and Jersey.

Today, these countries offer a well-regulated and reliable framework to help ensure investors’ interests are protected. For example, the Isle of Man has regulations in place which protect investors with policies issued by Isle of Man authorised insurers. The regulations state that if an authorised insurer is not able to meet its liabilities, then policyholders, located anywhere in the world, are protected by a compensation scheme which offers policyholders up to 90% of the value of their policies back, less any outstanding charges, and with no upper monetary limit.

The nature of the relevant regulations differs between offshore locations and it is important to fully understand the details before investing.

What do these companies offer?

Offshore insurance companies offer investment through their ability to provide life assurance products that invest in one or more underlying assets. These assets can vary, from investment funds to stock and shares, depending on the product and company. Whilst an element of life assurance is likely, this protection element is sometimes of minor consideration compared with the main investment focus of the product.

Offshore insurance companies offer investment opportunities through their ability to provide life assurance products that invest in one or more underlying assets.

This arrangement is sometimes referred to as a life assurance ‘wrapper’ or ‘bond’.

Offshore insurance companies typically offer a range of products, including single premium whole of life policies, often referred to as ‘portfolio bonds’. These portfolio bonds can provide access to almost all investment funds in the market. Some portfolio bonds allow you to invest in stocks and shares, government and corporate bonds, and other investment instruments, with the convenience of all assets being held in one portfolio, and giving easy access to capital.

As well as portfolio bonds, insurance companies may also offer products that can receive regular investments or a combination of regular investments and one-off cash sums.

Why invest offshore?

Insurance-based products offer the following advantages:

1

Investment freedom

Investments can be spread across a wide range of different funds and asset types. They therefore offer you the ability to hold many of the assets described in the other chapters.

2

Convenience

The insurance company takes care of the effort involved in investing in a diversified investment portfolio and manages all paperwork involved in buying, holding and selling investments. It is also possible to switch investments as often as required, all within a single product.

3

Consolidated valuations

A single product value is provided, which consolidates the value of all the underlying holdings. These regular valuations for the wrapper show the opening and closing values, a list of the current holdings, and a note of all transactions during the reporting period. They will also reflect any additional monies paid into or withdrawn from the wrapper.

4

Lower costs

You can benefit from the insurer’s purchasing powers. Due to the volume of business involved, insurers can often secure better terms from investment fund providers than a private investor is able to by investing directly in a fund.

5

Tax benefits

Perhaps the most significant advantage is the fact that the investment can usually grow virtually free of tax. This can result in potentially greater overall returns. The tax implications when you withdraw money from the wrapper will vary between countries, and it is important to be fully aware of the relevant laws in the jurisdiction in which you are resident for tax purposes. But, essentially, these products allow you to decide when and how to take proceeds from your investment. This means that you can decide when to pay tax and, if your circumstances change, at what rate.

6

Transfer and consolidate existing assets

Some single premium bonds allow you to transfer in your existing fund holdings and/or assets. This enables all investments to be held within one product wrapper – which can simplify administration and cut costs.

and finally...

Offshore investments are no longer restricted to the very wealthy and today are offered by major companies operating from politically and financially stable and reliable locations around the world. Given the options available, it is important for you to pick the right offshore investment.

A portfolio of investment funds, together with the ‘know-how’ of a financial adviser, can present a sound, individually-tailored solution.

Speak to a financial adviser who will be able to recommend investments that are suitable for your individual needs and that best fit your specific risk profile.