Vendor Selection for PPLI and Premium Financing: What to Probe During RFPs

High-net-worth (HNW) families in the United States use Private Placement Life Insurance (PPLI) combined with premium financing to achieve tax-efficient wealth transfer, asset segregation, and estate-tax mitigation. Selecting the right vendors—insurers, lenders, trustees, and professional advisors—is critical to execution, risk control, and ongoing governance. This guide shows what to probe during Requests for Proposals (RFPs) so fiduciaries and family offices in New York City, Los Angeles, and Miami can evaluate vendors with confidence.

Why focused vendor selection matters for PPLI + premium finance

PPLI and premium financing are interdisciplinary: insurance product design, securities/asset management offered inside the policy, complex lending, trust and estate law, and tax reporting all intersect. Errors in underwriting assumptions, lender covenants, or trustee operational capabilities can lead to margin calls, unanticipated taxation, or litigation. Vendors must demonstrate technical competency, transparent pricing, strong operational governance, and alignment with client objectives.

Core vendor categories to include in RFPs

• Life insurance carriers (PPLI sponsors)
• Premium finance lenders (private banks and specialty lenders)
• Trustee/administration providers (corporate trustees, trust companies)
• Asset managers/insurer investment teams (separate account managers)
• Advisory team partners (attorneys, CPAs, actuaries, and brokers)
• Independent auditor/compliance support (for ongoing reporting and governance)

Key RFP questions by vendor type

For insurers (PPLI carriers)

• Company track record on PPLI product issuance (number and size of policies; years of experience in the PPLI market).
• Financial strength ratings and reinsurance arrangements (A.M. Best, S&P, Moody’s).
• Fee structure: itemize all policy-level fees — mortality charges, administrative fees, asset management/wrap fees, and separate account expense ratios. Request sample illustrations using client-specific assumptions.
• Underwriting flexibility (medical underwriting timelines; use of accelerated underwriting; substandard rating handling).
• Investment options inside the policy: availability of separate accounts, range of asset classes, ability to hold alternative assets (private equity, hedge strategies) and liquidity/readiness to accept complex allocations.
• Minimum premium and policy size limits (PPLI commonly starts at $5M–$10M in the U.S.; confirm company minimums).
• Operational support: policy accounting, premium allocation, loan reporting, and annual reporting cadence.

For lenders (premium finance)

• Loan pricing methodology: base index (SOFR) and typical spread in bps. Example market practice: loans priced at SOFR + 150–300 bps; fixed-rate alternatives often range from ~4%–8% depending on term and credit factors. Clarify whether rates are firm or subject to periodic repricing.
• Loan-to-value (LTV) and collateral rules: what collateral is accepted (policy death benefit, separate account values, securities, real estate), and typical maintenance covenants.
• Margin call mechanics and cure periods; triggers for substitution or liquidation.
• Loan term, amortization, prepayment penalties, origination fees, and ancillary charges.
• Credit underwriting standards and examples of similar financed PPLI deals originated in major U.S. markets (NY, CA, FL).
• Operational processes for policy-pledging, premium drawdown schedules, and trustee/lender coordination.

For trustees and trust administrators

• Experience with life insurance-owned trusts (ILITs, life insurance trusts) and acceptance of premium financing collateral structures.
• Trust acceptance policy and trustee fees (set-up, annual admin, special services: loan accounting, lender interface).
• Escrow and funding mechanics: ability to receive lender payments, process premium remittances to insurer, and manage replacement transactions.
• Reporting capabilities for beneficiaries and advisors; preparedness to support audits or litigation.

For asset managers / separate account managers

• Approved list of managers for separate accounts; due diligence process and manager onboarding timelines.
• Fee transparency: manager fee schedules, sub-advisory arrangements, carried interest or performance fees.
• Liquidity constraints for inside-policy holdings and effect on policy valuations.

For advisors (attorneys, CPAs, actuaries, brokers)

• Demonstrated experience structuring PPLI + premium finance transactions in US jurisdictions (especially NY, CA, FL).
• Independence and conflict disclosures (fee models; referral arrangements with insurers or lenders).
• Sample engagement letters and fee estimates for legal opinions, tax memoranda, and actuarial modeling.

Comparative RFP scoring matrix (sample)

Pricing benchmarks and market context (U.S. focus)

• Base rate: Most premium-finance lenders index loans to SOFR (Secured Overnight Financing Rate). SOFR is the market-standard reference rate in the U.S.; lenders typically add a credit spread. (Source: Federal Reserve Bank of New York)
• Typical spread ranges (market guidance): SOFR + 150–300 basis points on bilateral credit facilities; fixed-rate alternatives commonly priced 4%–8% depending on term and client credit. Actual pricing depends on borrower credit, policy collateral quality, and lender risk appetite (examples include private banks such as J.P. Morgan Private Bank, Bank of America Private Bank / Merrill, Goldman Sachs Private Wealth Management, Northern Trust). Confirm current spreads in each RFP response.
• PPLI internal cost expectations: wrap/insurance administrative fees and separate account expenses commonly total 0.50%–2.00% annually, plus mortality cost that varies by insured age and underwriting class. Minimum PPLI policy sizes in the U.S. market commonly start at $5M–$10M of premium. Always request a net-of-fees, multi-scenario illustration. (IRS and securities rules apply to investments inside PPLI; consult counsel.)

External authoritative sources:

• SOFR reference: Federal Reserve Bank of New York — https://www.newyorkfed.org/markets/reference-rates/sofr
• U.S. tax context for life insurance: IRS — https://www.irs.gov/businesses/small-businesses-self-employed/life-insurance
• Rule-of-thumb on private placement securities and Reg D: SEC — https://www.sec.gov/fast-answers/answers-regdhtm.html

Due diligence red flags to include in RFP scoring

• Incomplete fee schedules, or packages where key fees are “available upon request.”
• Vague margin call mechanics or unilateral lender cure rights.
• No sample illustrations using client-specific assumptions (age, risk, premium pattern).
• Advisor compensation not disclosed or tied to product placement without clear disclosure.
• Insurer or manager unwilling to allow trustee oversight or independent valuation audits.

Practical RFP attachments to request (minimum)

• Recent sample policy illustration for an insured (age-band specific).
• Sample loan term sheet with all-inclusive economics (index, spread, fees).
• Copies of insurer separate-account fact sheets and audited financials.
• Template trustee engagement letter and fee schedule.
• Standard conflict-of-interest disclosures and referral/commission schedules.
• Example closing checklist and timeline from application to policy issue.

Closing checklist & recommended next steps (USA, HNW focus)

• Issue RFPs to a short list of carriers and top-tier private banks (e.g., J.P. Morgan, Bank of America Private Bank, Goldman Sachs, Northern Trust) and at least one specialty premium finance lender.
• Require side-by-side illustrations and a live term sheet for the loan.
• Convene a multidisciplinary evaluation: see Assembling the Team: How HNW Families Choose Attorneys, CPAs, Actuaries, and Brokers.
• Run a focused due diligence review using Due Diligence Checklist for Selecting an Insurer and Lender in High-Value Deals.
• Confirm fee disclosures and governance approach against Fee Models, Conflicts of Interest, and Transparency When Buying Large Life Policies.

Selecting vendors for PPLI and premium financing is as much about transparent economics as it is about operational maturity and governance. Using a well-structured RFP, clear scoring matrix, and independent legal and tax advice will materially reduce execution risk and help the family achieve its estate and wealth-transfer objectives in New York, California, Florida, and across the U.S.