The eye-popping $201 million life insurance policy — now dubbed the “most valuable life insurance policy” by the Guinness Book of World Records — may be a sign that the big case market is reviving.
Reinsurers are seeing an increase in jumbo cases as the economy improves. That’s significant, because reinsurers are the companies to which the direct writing carriers turn for help in writing the cases.
If reinsurers are seeing more cases than previously, that means money is moving at the primary level. That’s a good omen for agents and advisors in the big case market and for others whose business swirls around big cases.
It’s not as if the super-wealthy are popping up everywhere. “The trend was actually higher pre-2008, prior to the economic downturn,” said Nate Johnson, vice president and chief underwriting officer at SCOR Global Life Americas in Leawood, Kan.
But now, with the slow economic recovery, “the industry is beginning to see a slight trend upward again in larger/jumbo risks,” Johnson said.
Michael Pado, president and chief executive officer of Auigen Reinsurance Company of America, Red Bank, N.J., is seeing it too. The increase is tracking with the growth of the ultra-wealthy population, he told InsuranceNewsNet.
Growth of the ultra-wealthy
That growth spans all the high-net-worth categories. In 2013, for example, the number of billionaires in the U.S. rose to 443 from 334 in 2008, according to WealthInsight. The multimillionaire category (people with over $30 million in net assets, excluding principal residence) is up too — to 44,934 individuals from 30,807 in 2008, the researcher said.
For the $25 million and up category (excluding residence), Spectrem Group found there were 132,000 individuals in 2013 -- up from 84,000 in 2008. For the $5 million and up category, the 2013 numbers hit a record high of 1.24 million, up from only 840,000 in 2008, Spectrem said.
The $201 million case now deemed “most valuable” by Guinness is clearly outsized. Sold by Dovi Frances, managing partner of SG LLC in Santa Barbara, Calif., on the life of a well-known U.S. billionaire, it has unseated the previous Guinness record — a $100 million life policy sold in 1990 by Peter Rosengard from the United Kingdom on the life of a U.S. entertainment industry figure.
Why would any ultra-wealthy person want or need life insurance? Most jumbo cases are written for business purposes, Pado said.
One frequently-cited example is the case of the late Malcom Forbes, publisher of Forbes magazine and father of Steve Forbes, the current chairman and editor-in-chief of Forbes Media. Malcom died in 1990 with millions of dollars of life insurance in force. Reports differ over the total face amount he held at time of death — the range is from over $40 million to under $70 million — but virtually all sources agree the money enabled the family to keep Forbes magazine and other assets in the family, since the life insurance paid the estate taxes.
That was over 20 years ago, but today’s ultra-wealthy are still subject to estate taxes, so they buy life insurance.
Big case tips</p>
Reinsurers have a few thoughts for agents and advisors who want to enhance the chances of their big cases being placed successfully.
The most important thing is to ensure there is control and coordination of the case as it moves through the underwriting process, Pado said.
“If it’s a $100 million case, it will likely be placed with a number of insurers and reinsurers, ideally with no pre-existing exposure to that life,” he said. “No one company has that much capacity available for one person — it’s just too risky.” Sometimes even the reinsurers’ capacity is taxed, so their own insurers — the “retrocessionaires” — may be involved too.