Premium in specie

Many PPLI clients already own the portfolio they want the structure to hold. Instead of selling it and paying cash, they can transfer the assets to the insurer as the premium. The insurer accepts them at market value on the transfer date and from then on holds legal title to them in the segregated account.

How it works

1. The insurer reviews the assets and confirms they are acceptable. Listed securities and fund units are the usual candidates; unlisted assets need specific approval.
2. The assets are valued on the transfer date, and that value is the premium.
3. Legal title passes to the insurer, through the custodian, into the segregated account.
4. The investment manager takes over the portfolio under its mandate and can keep, sell or rebalance the assets.

Tax on the transfer

Transferring assets to an insurer can be a disposal for capital gains tax, because the assets are given up in exchange for the structure. In the UK, for example, disposing of an asset includes swapping it for something else, so any gain up to the transfer date is measured then. The country of residence at the date of transfer mainly decides the tax. In a country with no tax on an individual's capital gains, the gain may go untaxed there, but other rules can still reach it: the UK, for example, taxes gains made during an absence of five years or less on return, and US citizens are taxed wherever they live. The timing of a transfer around a move between countries can therefore change the result.

Worked example

Illustrative figures, not a forecast. A policyholder transfers US-listed shares worth US$3m, bought for US$1m, as a premium in specie.

• Premium recorded: US$3m, the market value on the transfer date.
• Gain on the transfer: US$2m, taxable where the country of residence charges capital gains tax on the disposal (for a UK resident, worked out in sterling).
• Inside the structure, the shares are the insurer's assets, and future growth compounds without an annual tax charge in many jurisdictions.

In a PPLI structure

Funding in specie lets a family keep a long-held portfolio, a manager's existing positions or an interest in a fund, and saves the cost of selling and buying back. Where the assets come from a trust or company, the trustees or directors approve the transfer. A single premium is common at PPLI levels, and part can be paid in cash and part in specie.

Common questions

Can I pay a PPLI premium with shares?

Yes, where the insurer accepts them. Listed shares and fund units are the assets most often transferred in specie; the insurer values them on the transfer date, and that value becomes the premium.

Is a premium in specie a disposal for capital gains tax?

It can be. In the UK, swapping an asset for something else counts as a disposal, so a gain can arise on transfer. Other countries apply their own rules, and some do not tax an individual's capital gains.

Go deeper: how PPLI works.

Sources

• GOV.UK: Capital Gains Tax, what you pay it on (disposing of an asset includes swapping it for something else)
• TCGA 1992 s.1M: temporary non-residence
• IRS: US citizens and resident aliens abroad

Last reviewed November 2026.