Par fund (participating fund)

A par fund, or participating fund, is the pool of assets an insurer keeps for its participating policies. Policyholders share in its profits through bonuses or dividends, which are only fixed once declared.

What is a par fund, and why is IUL non-participating?

A participating, or par, policy shares in the results of the insurer's par fund: its investment return, its claims and its expenses. Singapore, Hong Kong and Canada call the design participating; the UK calls it with-profits. Indexed universal life (IUL) is non-participating.

How a par fund works

Premiums from par policies are pooled in a fund kept apart from the insurer's other business and invested in government and corporate bonds, equities, property and cash, in a mix the insurer sets. Each policy has contractual benefits, such as the sum assured, and bonuses or dividends paid from the fund's surplus, which are not fixed until declared:

Reversionary bonus. Added to the sum assured, usually each year, and kept once declared. Only part of its value is paid on surrender.
Cash dividend. Taken in cash, used to reduce premiums, converted into paid-up additions, or left with the insurer to accumulate at interest.
Terminal bonus. A one-off amount at death, surrender or maturity, set when it is paid. It can be zero.

Insurers smooth bonuses, holding back surplus in good years to support bonuses in poor ones, so payouts move less than the markets.

Who decides, and the limits on shareholders

Singapore. The board approves bonuses after the appointed actuary's written recommendation. Shareholders can receive at most one-ninth of the value of bonuses allocated to par policyholders: S$1 for every S$9.
Canada. The actuary reports in writing on the fairness of each proposed dividend before the board declares it. Payments to shareholders are capped at a percentage of the profit distributed: 10% where participating account balances total C$250 million or less, with a blended rate that steps down in bands to 2.5% for balances above C$1 billion.
United Kingdom. Each firm must maintain Principles and Practices of Financial Management (PPFM) covering how it sets bonus rates, smooths payouts and divides profit with shareholders.
Hong Kong. Insurers publish fulfilment ratios: the bonuses and dividends actually paid or declared, in aggregate, against those illustrated at the point of sale.

Worked example

Illustrative figures, not a forecast.

Singapore split. Bonuses of S$9 million go to par policyholders for the year. Shareholders can receive up to S$1 million.
Fulfilment ratio. A Hong Kong product series illustrated US$100 million of accumulated dividends by year 10 and accumulated US$92 million: a ratio of 92%.
Two years in an IUL. The index rises 12%, then falls 10%. An IUL segment with a 9% cap and a 0% floor credits 9%, then 0%. A par policy's bonuses for those years follow the whole fund and the insurer's smoothing.

In an international IUL

International IUL is non-participating; one contract states on its first page that it is "non-participating (not eligible for dividends)". Each 12-month segment is credited with the index's price change, up to the cap rate, typically 9% to 11%, and never below the floor, 0% in most contracts. The cap is set when the segment starts, so the formula is known in advance; a par bonus is set after the year. Money waiting to enter the index earns a declared rate in the fixed account, the nearest IUL counterpart to dividends left to accumulate at interest. The account value is a contractual claim on the insurer's general account.

Common questions

What does par mean in life insurance?

Par is short for participating. A par policy shares in the profits of the insurer's par fund through bonuses or dividends, which are not fixed until declared.

Is IUL a participating policy?

No. IUL credits interest from an index formula with a cap and a floor, 0% in most contracts, and pays no dividends. The full comparison with participating whole of life is in IUL vs whole of life.

What does accumulate at interest mean?

It is a dividend option on a par policy. The declared dividend stays with the insurer, earns interest at a rate the insurer sets, and can be withdrawn later. The other usual options are cash, lower premiums and paid-up additions.

Go deeper: how IUL works.

Sources

Last reviewed November 2026.

A par fund, or participating fund, is the pool of assets an insurer keeps for its participating policies. Policyholders share in its profits through bonuses or dividends, which are only fixed once declared.

Related Terms:

CRS and FATCA reporting

Cash surrender value

Offshore bond

Illustrated rate

Annual point-to-point