Underwriting Enhancements & Case Design Tips to Help You Sell in the Foreign National Market

"I haven't been everywhere, but it's on my list" - Susan Sontag

High net worth individuals and families exist all over the world.  In today's global economy, you probably have clients with friends or relatives living abroad who are looking to buy life insurance from U.S. based companies.

Whether for business planning, wealth transfer, legacy planning, wealth accumulation or family protection, many foreign nationals are motivated by having monies outside their country of residence.  They desire the stability of US dollar denominated coverage, asset diversification and protection against any governmental changes or mandates that can negatively impact personal income and net worth.  In addition, US based insurance coverage provides recognizable carrier brand names, more product choices and options, better pricing, underwriting capacity to handle the largest cases, and US dollar liquidity via policy withdrawals or payment at time of death.

Selling in the foreign national market can be very rewarding, and yet challenging.  There are many things to be aware of which can enhance or become roadblocks to an otherwise profitable sale.

In view of this, it is critical to have a working understanding of regulations pertaining to foreign nationals, and to develop knowledge of unique carrier guidelines and rules when considering doing business in this market.  And equally important is having a firm grasp on case design for what different prospective foreign nationals find attractive for plans of coverage and funding patterns—and why.

 The Foreign National market is defined as those individuals whose home country and residence is outside the U.S.  This also includes U.S. citizens who have extended residency outside of the U.S.  At Windsor, we recently placed sizeable target premium policies on the lives of several foreign nationals.Two individuals were seeking coverage for the dual purpose of death benefit protection and cash accumulation.  Another was primarily seeking cash accumulation, while a fourth insured was strictly looking for death benefit protection provided by term insurance.  Index Universal Life (IUL) is often the product of choice for many foreign national sales.  Typically these plans are funded on a short-pay basis, anywhere between 5 and 10 years, to develop cash values quickly and provide liquidity outside the foreign national's home country:

  1. 45 year old female, Chinese National, $15 million Death Benefit IUL, target premium $110,000
  2. 50 year old male, Chinese National, $10 million Death Benefit IUL, target premium $200,000
  3. 45 year old male, South African National, $5 million Death Benefit IUL, target premium $70,000
  4. 54 year old male, Chilean National, $10 million Death Benefit Term, target premium $22,500

​You may have thought about entering the foreign national market and perhaps even dabbled in this market in the past.  If you have, now is the time to make a major push to uncover sales opportunities. Why?   Because carriers, in their quest for new and additional sources of revenue, have increased their appetites for foreign nationals and relaxed rules, making it easier for applicants to qualify for coverage.  For example, we've seen some liberalization in nexus and power of attorney for policy delivery — traditional stumbling blocks when writing this type of business.  Several carriers are active in the foreign national market, with Global Atlantic, Lincoln and AXA being noteworthy for their progressive guidelines and rules.


  Recent Underwriting Improvements

Nexus

Traditionally one of the major roadblocks to uncovering and completing a sale, nexus is the physical and financial connection an applicant has to the U.S.    Many carriers require minimal annual stays, such as 15 days, in the U.S.  And they typically require some type of financial presence such as a U.S. bank account or brokerage account with a minimum balance, along with other connections such as U.S. real estate or business ownership.

We've seen recent and welcome nexus liberalization with certain carriers that will help considerably.  For example, physical U.S. connection has been loosened with some carriers to just a few days or less in the past few years.  Some carriers even consider having a full time college student in the U.S. as nexus for a parent desiring coverage.

Also, the requirement of U.S. financial presence has been greatly reduced.  In some cases, having $100,000 in a "seasoned" U.S. bank account after paying premiums will satisfy underwriting.  And with certain carriers in some situations the required amount may be considerably less.

Power of Attorney

Carriers typically require all solicitation as well as application and insurance exam paperwork to be completed in the U.S., because domestic carriers are often not licensed to conduct business outside the U.S.  But what happens after policy approval?  This becomes problematic since many carriers also require an insured to return to the U.S. for policy delivery.

To get around this challenge, an expanding number of carriers provide a limited power of attorney allowing a surrogate to accept coverage on behalf of an insured/owner — a welcome change to a step fraught with potential delays.  To execute the power of attorney, participating carriers will require a notarized form or letter with appropriate signatures prior to policy issue.


Acceptable Countries

The list of acceptable countries has expanded.  Colombia, Russia, Vietnam, Qatar, all major cities of China, and several others are showing up on approved carrier lists.

Some of these are "A" countries, with mortality similar to the U.S. and are allowed best rates.  And some are "B" countries that provide less than best rate classes.  However, the fact that there is an expanding list of countries is positive.  In view of this it's typically worth a call to find out if a citizen of a foreign country is writable for coverage and on what basis.

Premium Finance

Several carriers will now consider premium financing arrangements for foreign nationals.  There may be certain rules and guidelines such as minimum net worth (for example, $10 million), minimum earned income ($250,000) and ongoing payment of interest.  However, being able to finance premiums is a real advantage, providing an alternative way to pay for premiums which in many cases can be quite expensive.

Capacity

Industry capacity for the "A" list countries has been enhanced and is substantial, in the $180 million range.  This amount includes available carrier retention and reinsurance capacity for permanent coverage, and assumes no health, aviation, avocation, travel, occupation or other concerns.  This amount will handle many of the largest cases in the foreign national market.


  Case Design Tips

Below are case design models Windsor has successfully used when considering coverage for applicants in three different foreign national markets.  They demonstrate differences in what various foreign national applicants consider their highest priorities, and provide guidance as you come across various sales opportunities.

Chinese Nationals

The objectives of many Chinese Nationals are to diversify investments, accumulate cash, create an alternate source of income outside China and provide death benefit protection to heirs in case of death.  Since there is no estate tax in China, coverage is not includable in one's estate upon death for tax purposes.  A benefit of this is that polices are often owned by the insured to provide policy level control and decision-making autonomy.  Also, since there is no reporting to the Chinese government, life insurance is attractive for the privacy it affords.

Case design commonly includes:

  • Short pay premium patterns, ranging from 5 to 10 years.  Short pay is often preferred by applicants to quickly move large sums of money outside the political and economic environment of China, and for funds to be put to work immediately.
  • Index universal life (IUL) plan of coverage, with the ability to provide cash accumulation and death benefit protection.
  • Income withdrawals may be included, depending upon the needs and goals of the applicant.

Mexican Nationals

There is no estate tax in Mexico, so the objectives of many Mexican Nationals, like Chinese Nationals, are to diversify investments, accumulate cash, create an alternate source of income outside Mexico and provide death benefit protection in case of death.  However, even without an estate tax, there are death benefit sale possibilities for various individual or family planning objectives.  Often polices are trust owned, but there is also individual ownership in order to provide policy level control and decision-making autonomy.

Case design commonly includes:

If cash accumulation and death benefit are desired:

  • IUL product chassis
  • Short pay premium patterns, ranging from 5 to 10 years
  • Reasonable death benefit
  • Withdrawals starting at a projected age and extending for a period of years


If death benefit is desired:

  • Guaranteed UL (GUL), current assumption UL (CAUL) or IUL single life or last survivor product chassis

  • Coverage is modeled to last anywhere from life expectancy to life time
  • Premium funding pattern dependent upon client preference

Japanese Nationals

The estate tax in Japan is very onerous, consuming up to 55% of an estate at the highest levels.  In view of this, death benefit is the primary objective for many Japanese nationals.  Often polices are trust or LLC owned.

Case design commonly includes:

  • Single life plans of coverage
  • GUL or IUL product chassis
  • Death benefit guaranteed for life time
  • Premium funding pattern dependent upon client preference


The specific design scenarios indicated aren't necessarily unique to the countries above.  You will find these same recurrent themes to be present with applicants of other foreign markets.  Much depends upon the client's need to diversify, need to accumulate monies outside their country of residence, level of "in country" taxation and other variables mentioned earlier.  

In addition, it is critical to gain a thorough understanding of carrier guidelines and rules when considering doing business in this market.  Combining this knowledge with case design will help ensure a successful and prosperous outcome.

At Windsor, we work in the foreign national market every day, successfully steering cases through the often complex process of products, carriers, underwriting and placement.  Bring us your next foreign national case and let us do the rest — we will be glad to help you expand your sales success.

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Thursday, 20 June 2024

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