L.I. Far East is trying to bring some of the benefits of insurance policies to high net worth individuals. The company is championing the Privatbancassurance concept pioneered in Europe by Luxembourg-based insurance firm Lombard International. L.I. Far East managing director Paul Rust said his company worked closely with Lombard. 'They are the biggest provider of these sorts of services in the world. They have a huge pan-European business, but it is only since we formed a broker in Hong Kong that they have begun working with us to develop products for Asia,' he said. Mr Rust said high net worth clients, wealthy by definition, had little need for traditional insurance, being effectively self-insured. However, they had a great need for effective tax structures, asset protection and succession schemes. Insurance products could help deliver all three. In Europe, Privatbancassurance brings sophisticated insurance solutions to private bank clients. The aim is to enable them to achieve tax and estate planning, and asset protection, through insurance, while leaving asset management and advisory services in the hands of their private bank. 'There is a lot of talk in the Asian private bank community in relation to the issue of insurance for high net worth individuals,' Mr Rust said. 'It is a relatively recent phenomenon, but it has taken off in the past three or four years. We try to use life assurance as a structuring tool for high net worth individuals. We basically believe the high net worth client doesn't really need traditional insurance. What they do need is the tax protection, asset protection and succession planning benefits that insurance can bring. So we try to provide an insurance policy to actually hold your assets. It is very similar in a way to the use of offshore trusts.' Tax effective insurance solutions are more readily appreciated in high tax countries, and L.I. Far East has begun offering its products in the high tax Asian nations of Taiwan and Japan. Mr Rust said estate duties in Taiwan could be as high as 50 per cent. 'What we have tried to develop with a number of banks is to have a solution which will enable the client to transfer his assets, his bank relationship, and his offshore bonds and equities into an insurance policy as payment of a premium. When the individual dies, the payment the family receives is the proceeds of life insurance which, in Taiwan, is free of estate tax. 'We are trying to take the tax benefits of insurance and, in crude terms, turn the private client's portfolio into an insurance policy, so that the income and gains are the proceeds of a life insurance benefit.' Although the concept was relatively new for Asian private banks, Mr Rust said some were starting to realise that offering insurance services through a broker could be a valuable way of differentiating themselves in a crowded market. 'Private clients generally in Asia are leaning towards the banks that provide the best advice. Banks are having to become more sophisticated in the advice they give clients in relation to wealth management, and this is one of the tools they can use. It is becoming accepted by banks because they realise private clients are having to plan more efficiently, tax wise, than perhaps ever before.' Mr Rust, whose background includes the structuring of foundations and trust vehicles for private clients, said insurance products were more universally accepted by governments and tax authorities in Asia. 'Insurance is an incredible tool in that governments have encouraged people to use insurance for pensions, social security and other reasons, so insurance has received significant tax breaks, even where tax breaks are not high. So we are trying to take those benefits and apply them to a private bank client who doesn't actually need insurance,' he said. 'Tax authorities know how to [do] tax insurance, so you get a degree of certainty which, perhaps, you don't get using foundations, trusts, offshore companies or other structures.' In Hong Kong, although the tax burden was relatively low, insurance products could be useful in dealing with the heavy offshore mix of many wealthy families, Mr Rust said. 'In Hong Kong, every wealthy family has someone with an offshore passport, living offshore [and complying with] different tax regimes.'
