Despite geopolitical volatility, sometimes-turbulent debt and equity markets, the insurance sector continues to demonstrate resilience^.  In times of market volatility and uncertainty inherent in global markets, life insurance can play a pivotal role in providing flexibility and growth for your high-net-worth clients’ personal as well as business needs.

 

Life insurance solutions provide clients and their businesses with peace of mind and ensure business continuity through sum assured death benefits payable on demise of the life insured.  Liquidity from insurance proceeds can be used to pay off outstanding obligations and sustain the business liquidity pool, and retention of key employees ensures continuity of the business during critical periods while providing protection for the future.

 

It is even more timely now for your clients to consider life insurance as an emerging and alternative asset class that provides opportunities and protects against financial hurdles.

 

Source:

 ^   https://www.spglobal.com/ratings/en/sector/insurance/insurance-sector (best viewed on Chrome) (best viewed on Chrome)

 

 

Types of Applications for Business Continuity

 


Buy-Sell Agreement

  • Provides liquidity to fund a buy-sell agreement upon demise of a business partner


Senior Executives Retention Plan

  • A solution for business owners to incentivize and retain talented executives
  • Increases stability and attractiveness of company to new investors

Key-Person Protection

  • Compensates company’s potential drop in earnings and/or share price upon premature demise of key-person(s)
 
 

Asset Diversification for Business Continuity

Why is it important to plan ahead to ensure a smooth transfer of business to preferred successors, with certainty and stability?  As a case-in-point, Universal Life (UL) insurance has helped one of our clients, three brothers in their forties, with Key-Person protection for business continuity as well as for personal needs in such unprecedented and challenging times.  The three brothers:

 

  • Have invested their time building the family business and wealth over the years
  • Are looking to further expand their business
  • Are keen to ring-fence and explore diversification of their total assets to preserve their personal wealth
 

Clients’ Initial Concerns and Needs

Each brother plays a key role in the business. One of their priorities is to ensure business continuity by ensuring some liquidity will be ploughed back into their business should an unfortunate event arise. On the personal front, each of them is at slightly different stages of their lives and would like to ensure their own family nucleus will be provided for while spending their time and financial resources on their family business.

 

 

PCS by Mercer Solutions

Approximately 9 months later, the three brothers faced potential margin calls on their leveraged investments during the recent market volatility in the first quarter of 2020.

 

They required additional stand-by liquidity for their business but did not wish to compromise their protection coverage.

 

A total of 3 UL insurance policies - one policy per sibling with Sum Assured of US$20 Million each with different insurers – was proposed, which resulted in:

 

  • Diversification with different insurers
  • Availability of stand-by liquidity as their fully paid policies were pledged to their Bank
  • Protection of their Business Key-Person as well as for personal needs

 

 

Key Success Factors and Takeaways

With the UL policies they had bought earlier:

  • Clients were relieved that the cash values of their policies were stable and provided them a liquidity lifeline at the time when they needed it most
  • Each of their coverage is still intact and not compromised -- especially crucial at a time when COVID-19 is still prevalent
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Our experienced Private Client Services by Mercer Consultants across Singapore, Hong Kong, Dubai and Switzerland are here to support you in these uncertain times and beyond.
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