The record for the world’s “most valuable life insurance policy” has been broken by a Silicon Valley billionaire who purchased a policy valuing a total of $201 million. The insurer preferred to remain anonymous.
Managing Partner of SG LLC, Dovi Frances, sold this record-breaking insurance policy. He said that getting the deal together had been a challenge which involved “negotiating concurrently with over two dozen insurance companies and complex underwriting requests from each insurance company.”
The entire process took over seven months and a total of 19 insurance firms were involved to put the deal together. “No one company can afford to take a $201 million hit,” Frances said to AP. He said that getting the transaction together had proven to be a much bigger challenge than the worst audit anyone can think of.
The Guinness Book of World Records has confirmed this to be the most valuable life insurance policy and credits Frances with the record for selling it. He said that it had taken Guinness officials about three months to review the records.
The previous record was set in 1990 by Peter Rosengard from the UK when he sold a $100 million life insurance policy to David Geffen, a Hollywood mogul.
“The policy has a combined death benefit to be paid upon the death of the single insured,” a press release of SG, LLC informed. It also said that the insurance purchaser is a well-known billionaire who resides in the Silicon Valley area of California and is a tech investor. “He is widely known for actively participating in the technology space,” Frances added.
“SG, LLC is a global advisory firm that provides high-net-worth clients with unique solutions to their complex financial needs,” informs their press release. The Silicon Valley billionaire became a client of SG, LLC when they issued a direct mail campaign to solicit new business in 2010. The billionaire had applied to the firm and been accepted, and now he has a record-breaking insurance policy.
According to Frances, the Silicon Valley billionaire prefers to remain anonymous to protect his privacy and also to keep his policy a secret from his benefactors. “He wants his next of kin to keep working hard,” Frances told AP. The age of the billionaire is also unknown.
The Silicon Valley billionaire is compassionate towards his relatives too. He wants to help his heirs avoid paying a 45 percent inheritance tax upon his death and therefore, he purchased the insurance to “compensate” them.
“In California, there are state death taxes that are exceptionally high,” Frances said to Forbes, further explaining that “If your properties are leveraged then those loans are called immediately and need to be paid off. So if you want to head yourself against such a risk [your beneficiary] can receive the proceeds [from life insurance] without being exposed to taxes.
However all is not compassion for the Silicon Valley billionaire. There is a certain level of business too. Frances informed that since interest rates are very low at the moment, many of the very wealthy people are taking out big loans, which are to be fully paid upon death. Frances said that, “Most billionaires have their value tied up in hard assets and maybe don’t have so much cash immediately available for such a big hit.” This is where the insurance policy comes to the rescue.
Annual premiums for such hefty deals are “the low, single digits of millions of dollars.” The insurance firms get a piece of the pie by immediately investing the premiums. The only challenge for them is an untimely early death of the billionaire. The firm also charges a six-figure sum annually as service fee.
The attempt to narrow down the mystery Silicon Valley billionaire, who purchased the record-breaking insurance policy, to one name may prove to be a challenge. SG, LLC has several billionaires as clients, including chairman of Google, Eric Schmidt and co-founder of Palantir Technologies, Joe Lonsdale. Furthermore, there are 111 billionaires in California, of which a third are tech investors, with San Francisco alone boasting of 20 billionaires, according to Forbes.
By Faryal Najeeb