Bosch Media Service

OREANDA-NEWS. In this A.M.BestTV episode, A.M. Best’s Yuhmei Chen, senior financial analyst, and Elmo Chin, assistant vice president, share their perspective on the securitization of pools of collateralized loans used to finance the premiums of life insurance policies.

“A life-related traditional premium finance loan (TPFL) is a cost-effective means to fund the premiums of life insurance policies,” said Chen. “It is utilized by high net worth individuals for estate planning as well as by companies for business purposes.”

Chin spotlighted details of a life-related TPFL.

“The originator or lender establishes the premium finance loan program, works with insurance agents/brokers or the insurance company and establishes underwriting procedures and guidelines for the loan origination process,” explained Chin.

Chin also focused on the borrower, which is usually an irrevocable life insurance trust for an individual, or a master trust for a corporate entity, in both cases called a “Trust”. Additionally, the Trust is the owner of the life insurance policy and all collateral is transferred to the Trust, which insulates it from the estate of the entity establishing the Trust.