What Can PPLI Own? Private Companies, Operating Businesses and Alternative Assets Inside Private Placement Life Insurance

Private placement life insurance can hold most of what an institutional portfolio holds. Cash, government and corporate bonds, listed equities, hedge funds, private equity, private credit, real estate and, in certain carefully built structures, interests in private operating companies can all sit inside the separate account of a properly designed policy. What the policy cannot be is a personal holding company. The policyholder does not own the underlying assets, does not select individual securities and cannot instruct anyone to buy a chosen business. Whether a specific private-company exposure belongs inside PPLI depends less on the asset itself than on a set of questions that recur throughout this article: who owns it, who selected it, who controls it, how it is valued, whether it is diversified, whether the carrier accepts it, whether the contract remains life insurance under the law that governs it, and how the relevant jurisdiction treats the arrangement.

That framing matters more now than it did ten years ago, because a growing share of the world's business value never reaches a public market. Jefferies, in its Global Secondary Market Review published in January 2026, reported that global secondary transaction volume reached $240 billion in 2025, up 48 percent year over year and the largest annual total on record. GP-led transactions accounted for roughly $115 billion of that volume, up 53 percent; the average continuation vehicle grew to roughly $900 million; and single-asset continuation vehicles exceeded half of continuation-vehicle volume for the first time. BlackRock's 2026 Private Markets Outlook describes private credit as an ecosystem of roughly $1.9 trillion in assets and notes that, with IPO and M&A activity slower in recent years, many companies are simply staying private for longer.

The consequence is easy to state. More business value sits in private hands, for longer, than at any point in modern market history, and families whose wealth is concentrated in exactly that kind of asset increasingly ask how private-market exposure, including operating businesses, interacts with insurance-based structures. The short answers run on a spectrum. Exposure to diversified private-market funds through a policy is routine and well established. Minority positions in private companies are possible with the right structure and carrier. A controlling acquisition of an operating business inside a policy is rare, difficult and often inadvisable. Placing the family's own company inside a policy is the hardest case of all, and the one most surrounded by misconceptions. Readers new to the architecture may want a grounding in what private placement life insurance actually is and how the policy, separate account and investment mandate fit together before working through the harder cases below.

Who legally owns the assets

Every serious question about assets inside PPLI starts with ownership, because the popular mental picture is wrong. The policyholder does not hold a brokerage account wrapped in an insurance label. The policyholder owns an insurance contract: a bundle of contractual rights that includes cash value, the ability to request policy loans or withdrawals subject to the contract's terms, and a death benefit. The investment assets themselves are legally owned by the insurance carrier through its separate account, or by the segregated account structure the relevant jurisdiction provides. An independent investment manager selects and manages investments within a mandate agreed with the carrier. A custodian holds the assets. In United States tax terms, the contract must qualify as life insurance under IRC Section 7702, through either the cash value accumulation test or the guideline premium and corridor test, for the tax treatment of life insurance to apply at all.

This chain is not a formality. Most of the failures examined later in this article, from the investor-control cases to rejected acquisitions, are at bottom attempts to behave as though the chain did not exist: to treat the separate account as a personal holding company with a tax advantage attached. Courts and regulators read through that behaviour, and carriers refuse it.

An asset map: what a policy can typically hold or reach

The tables below map the three broad groups of assets families ask about. No entry is a simple yes or no. Each line shows the typical route of access and the constraints that decide real cases: valuation, liquidity, diversification, investor control and carrier approval. A policy issued in Luxembourg, Liechtenstein or Bermuda for a non-U.S. family will apply different rules than a U.S. contract, but the same five constraints appear everywhere in some form.

Common institutional assets

Alternative investments

Private and operating-company interests

Insurance-dedicated funds: the standard route to private markets

An insurance-dedicated fund is a pooled vehicle whose interests are offered exclusively to insurance-company separate accounts and a narrow set of other permitted holders. That exclusivity is not a marketing preference. Under Treasury Regulation §1.817-5(f), a separate account may look through a partnership, trust or regulated investment company to its underlying assets for diversification testing only if the entity qualifies, and Rev. Rul. 2003-92 makes the point in the other direction: where interests in a non-registered fund are available to the general public, look-through fails, and the account is treated as holding a single asset. Insurance-only access is therefore structural, not cosmetic. IDFs typically rely on the Section 3(c)(1) or 3(c)(7) exclusions from the Investment Company Act, and the policies that hold them are offered as private placements to accredited investors under Regulation D and, in practice, to qualified purchasers under Section 2(a)(51), which for individuals generally means at least $5 million in investments.

Inside the fund, an independent manager exercises full discretion. The policyholder may allocate among IDFs on a carrier's platform but has no voice in what any fund buys. That separation is precisely what makes the structure workable under U.S. investor-control analysis, and it is also how private markets enter the policy: an IDF can commit to private equity funds, hold private credit portfolios, run secondaries programmes or blend all three, provided its own diversification and liquidity management hold up. The same architecture supports hedge fund strategies structured for insurance accounts and private credit portfolios held through segregated insurance accounts. One warning belongs in bold type: calling a fund an IDF does not make it compliant. Compliance is a set of facts about access, diversification and discretion, tested continuously, not a name on an offering memorandum.

Separately managed accounts: custom mandates, same discipline

Where a family's premium is large enough, a carrier may permit a separately managed account instead of, or alongside, pooled funds. The carrier appoints an independent investment manager, often one the family's advisers proposed but the carrier approved, and the manager runs the account under a written mandate: eligible asset classes, concentration limits, liquidity minimums, valuation procedures, custody arrangements and reporting. The mandate is a contract between manager and carrier. The policyholder can express broad preferences at the design stage, such as a growth orientation or an income orientation, and can usually reallocate among approved mandates later.

What the policyholder must never do is direct the account: no instructions to buy a particular security, no suggestion to pursue a particular company, no negotiating an acquisition the account will fund. In the U.S., that behaviour is the investor-control doctrine's central concern, examined below. Outside the U.S. the same conduct can breach the carrier's rules or, in some jurisdictions, statutory conditions for insurance treatment. An SMA gives customisation of the mandate, not custody of the decisions. Valuation in an SMA holding private assets follows the carrier's accepted methodology, custody sits with an approved institution, and reporting flows to the carrier first, because the carrier is the legal owner.

Can PPLI invest in private companies?

Yes, within limits that vary sharply by the form of the exposure. The honest answer differs for each of the eight forms families actually propose, and in every case it depends on the policy, the carrier, the account structure, diversification, valuation, liquidity, the manager's authority and the applicable law.

Diversified private equity funds are the settled case. An IDF or approved account commits to funds run by independent sponsors; the account holds fund interests; the sponsor governs the portfolio companies. This is the form in which most policy money reaches private business value, and the mechanics of private equity allocations held inside insurance structures are well developed. Venture capital funds work the same way, with longer valuation lags and higher dispersion. Private debt is often the most natural fit of all, because lending returns are taxed heavily outside a policy and the loans throw off cash the policy can use.

Minority interests in individual companies are possible where an independent manager selects them, an acceptable valuation process exists, and the position fits the account's concentration limits. Pre-IPO shares are a special case of the same rule with an extra hazard: a policyholder who wants specific pre-IPO names inside the policy is describing investor control, and the fact pattern of Webber v. Commissioner, discussed below, is exactly that. Direct investments chosen by the account's manager can be acceptable to some carriers; direct investments proposed by the family usually are not. Co-investments alongside independent sponsors are increasingly common in institutional portfolios and can be held where the carrier permits them, but each one adds single-issuer exposure the diversification tests must absorb. Controlling stakes are the frontier case, and they deserve their own section.

Can PPLI buy an entire company?

Sometimes, in a narrow sense, and almost never in the sense families first imagine. Start with what is realistic. A buyout fund held by the separate account buys companies constantly; the account participates in those acquisitions through its fund interest, with the sponsor holding control, board seats and voting rights. A carrier-approved partnership or SPV, formed and governed by an independent sponsor, can acquire a business with the account among its investors. In a large SMA, a manager with genuine discretion could in principle acquire a controlling position if the mandate, the carrier and the diversification arithmetic all permit it. Direct ownership of an operating company by the carrier's account, outside any fund or vehicle, is uncommon, jurisdiction dependent and reserved for structures designed around it.

Now the constraints. Control brings governance: someone must hold the board seats, exercise the votes and supervise management, and that someone cannot be the policyholder or the family, or the arrangement collapses into personal control of account assets. Concentration is arithmetic: a single business large enough to be worth acquiring is usually large enough to breach any sensible diversification standard, and in U.S. contracts the quarterly tests of Section 817(h) leave little room. Financing adds leverage the carrier must underwrite; valuation of a controlled private business is annual at best and contested at worst; the eventual sale may take years to arrange; and distributions from the operating company must flow to the account, not the family. Every element requires carrier and custodian approval, and specialist legal review beforehand.

Three sentences summarise the position. A family cannot assume it may direct its policy account to buy a business it has chosen. A controlling acquisition can conflict with diversification and investor-control principles at the same time, which is why carriers so often decline. The fact that an asset is privately held does not make it suitable for a policy.

Can a founder place an existing company into a policy?

This is the question behind many enquiries, and it deserves the plainest answer in the article. A founder cannot move appreciated shares of an existing company into a PPLI structure and escape the gain that has already accrued. Transferring appreciated assets to a carrier in exchange for policy value is generally a taxable disposition: the built-in gain is recognised, not deferred. Premiums are normally paid in cash; in-kind funding is exceptional, entirely carrier dependent, and does nothing to erase pre-existing appreciation. Any presentation suggesting a company can be slid into a policy tax-free is describing a transaction the tax law does not offer.

Suppose the founder accepts that and proposes a sale at fair market value to the account, or wants the account to acquire shares in the founder's company as an investment. Now a different set of obstacles appears. The valuation must be independent, defensible and repeatable, and a founder-influenced valuation is a conflict on its face. The transaction is related-party dealing, which carriers examine closely and frequently refuse. If the account's purchase of the founder's shares was understood from the outset, the arrangement risks being characterised as prearranged, with the policy serving as a conduit for a transaction the family had already decided, which undermines both investor-control and insurance characterisation. Concentration arithmetic rarely works, because a founder's company is usually the largest single asset in sight. Securities law, corporate law and the company's own shareholder agreements add further consents. And the policy itself requires medical and financial underwriting of the insured, which no asset strategy removes.

None of this means pre-liquidity planning is pointless. It means the genuine version starts early, is independently advised, and typically involves funding a policy with cash or diversified assets well before any exit, so that future investment activity, possibly including private markets, occurs inside the structure from the beginning. PPLI is a container for future growth under independent management. It is not a method for retroactively sheltering gains that have already economically accrued.

Family-owned and related companies: the heightened-scrutiny zone

Related-company exposure is neither universally prohibited nor universally permitted; it is universally scrutinised. The reasons are practical. Where the family controls the company, every channel of influence becomes a question: management roles held by family members, employment relationships, board composition, voting arrangements, transactions between the company and the family, loans in either direction, and any personal use of company assets. Each is a route by which the policyholder could exercise control over an account asset or extract value outside the policy, and each therefore threatens the characterisation of the whole structure.

Valuation is the second problem. A company that transacts with the family, employs the family or is priced by advisers the family selected cannot produce the independent, repeatable valuations a carrier needs. Distributions are the third: dividends from the company belong to the account, and any arrangement that lets them reach the family directly is a withdrawal in disguise. Where related-company exposure is accepted at all, it tends to involve a genuinely independent manager, arm's-length documented terms, an external valuation firm, explicit carrier sign-off and a position small enough that the diversification tests are untroubled. That combination is rare, which is the honest way to describe the category.

Diversification: the 55/70/80/90 arithmetic

For U.S. contracts, IRC Section 817(h) and Treasury Regulation §1.817-5 impose a diversification test measured at the end of each calendar quarter: no more than 55 percent of the separate account's assets in any one investment, no more than 70 percent in any two, 80 percent in any three, and 90 percent in any four. The consequence of failure is severe. The contract ceases to be treated as life insurance for the period of non-diversification, and the income on the account is taxed to the policyholder. A working treatment of the definitional and diversification rules together appears in the Section 7702 and 817(h) compliance framework.

Two refinements decide the hard cases. First, what counts as one investment. Look-through under §1.817-5(f) lets a qualifying entity's underlying assets count separately, which is how a single IDF holding two hundred positions satisfies the test. But qualification is strict: broadly, interests must be held exclusively by insurance-company segregated asset accounts and certain permitted holders, and Rev. Rul. 2003-92 confirms that a non-registered fund whose interests are available to the general public does not qualify. Second, look-through cuts both ways. An SPV formed to hold one operating company looks through to exactly one issuer. The vehicle does not cure the concentration; it merely relabels it. That single sentence disposes of many proposed acquisition structures.

Non-U.S. policies sit outside Section 817(h), but not outside diversification. Carriers in Luxembourg, Liechtenstein and Bermuda apply their own concentration standards, and Luxembourg's regulator grades permissible assets by policyholder wealth and premium size within the Luxembourg framework built around the triangle of security. A single-asset account is difficult to place anywhere reputable, whatever the governing law.

Investor control: the doctrine that decides the hard cases

U.S. law asks who really controls the separate account's investments, and it has asked the question since a line of rulings beginning with Rev. Rul. 77-85 and continuing through Rev. Ruls. 80-274, 81-225 and 82-54. The modern guidance is Rev. Rul. 2003-91, which describes a safe set of facts: the policyholder chooses among broad investment strategies, communicates with no one about specific investments, and the manager exercises full discretion. Stay inside those facts and allocation among approved strategies or managers is unproblematic. Step outside them and the tax ownership of the account can shift to the policyholder.

The step outside has a reported illustration. In Webber v. Commissioner, 144 T.C. 324 (2015), the Tax Court examined a policyholder who directed specific startup investments through a stream of communications framed as recommendations. The court treated him as the owner of the separate-account assets and taxed him on their income. The lesson is not subtle: for a family contemplating private-company exposure, the doctrine forbids choosing target companies, negotiating an acquisition, instructing the manager to buy a specific business, exercising personal voting or managerial control, running a family operating business through the account, or treating the structure as a personal investment account. The fuller treatment in this analysis of the investor-control doctrine traces the rulings and the case law in detail.

One caution for international readers: the U.S. doctrine is a U.S. rule, and it does not apply identically worldwide. Germany reaches a similar destination by statute, denying insurance treatment where the policyholder can economically determine the disposition of individual assets. Luxembourg regulates the question through contract categories and the carrier's investment rules. Families connected to several countries need the analysis run in each, a point developed in the discussion of internationally connected policyholders.

Valuation: the discipline private assets cannot skip

A policy is an accounting entity. Cash values, charges, loan capacity and death benefits all depend on the value of the separate account, so every private asset inside it needs a valuation policy the carrier accepts: independent, repeatable, documented, timely enough for policy accounting, and strong enough to survive an audit. Fund interests inherit the fund's audited net asset value, which is why funds are the easy case. Direct positions need external valuation firms, agreed methodologies and a calendar.

The recurring problems are predictable. Stale valuations that lag reality by a year. Founder-controlled valuations that no auditor should accept. Intellectual property whose value is an argument rather than a number. Contingent consideration from earn-outs that may never pay. Highly leveraged acquisition structures where small enterprise-value errors swing equity value violently. Distressed companies whose value changes faster than any quarterly cycle. Each of these can make an otherwise attractive asset unadministrable inside a policy, and carriers reject assets on valuation grounds as often as on any other.

Liquidity and policy mechanics

An illiquid company can be economically valuable and still operationally unsuitable, because a policy has running costs that do not pause for a holding period. Insurance charges and mortality costs are deducted on schedule; private-market commitments generate capital calls on the fund's schedule, not the family's; and an operating company may itself need cash at the worst moment. The account therefore needs a liquidity plan: a funded cash sleeve, laddered distributions from income-producing assets, or premium design that anticipates the commitment pacing. The cost side of that arithmetic, including how charges interact with illiquid allocations, is set out in the survey of policy costs and economics.

Policy loans complicate the picture in both directions. A loan can provide liquidity to the family without selling account assets, and loans are generally not taxable while the policy remains in force and is not a modified endowment contract under Section 7702A; a MEC's distributions and loans are taxed less favourably, and a lapse with loans outstanding can convert accumulated gain into taxable income at the least convenient time. Nothing about policy borrowing is automatic, and the mechanics in this explanation of how policy loans work repay attention before any borrowing is planned. Heavy illiquid allocations raise lapse risk precisely because the assets that would otherwise cover charges cannot be sold quickly; forced sales of private positions happen at discounts; and exit timing on a controlled business can be measured in years. Death-benefit levels, loan collateral and distribution planning all need to be modelled against that reality.

Carrier and provider due diligence

Carriers differ widely in what they accept, how they value it and how they behave when something goes wrong, and the differences matter most for exactly the assets this article discusses. A structured approach to evaluating PPLI carriers before committing premium should cover at least the following questions.

When the structure makes sense

Private assets inside PPLI are economically rational in a recognisable situation: a long investment horizon, meaningful tax drag on the strategies being considered, institutional scale, genuine willingness to hand selection to independent managers, a diversified private-market portfolio rather than one prized asset, liquidity planning that anticipates calls and charges, a real insurance need served by compliant policy design, multigenerational intent, and advisers coordinated across every relevant jurisdiction. Families matching that description tend to treat the policy as an institutional allocation programme that happens to be insurance, which is the correct posture. A fuller profile of the families and situations these policies tend to suit is available for readers testing the fit, as is a view of where PPLI sits within a wider private wealth architecture.

When it may not

The structure resists a different list: wealth concentrated in one family business the family will not dilute; a sale already being negotiated, which makes any policy funding look prearranged; a need for personal control over the asset; portfolios that cannot meet diversification standards; immediate liquidity needs; valuations no independent firm would sign; costs that exceed the realistic tax benefit at the family's scale; any intention of personal use of the assets; a carrier unwilling to approve the proposal; uncertain recognition of the contract in the family's tax residence; or simply a short horizon. Several of these are not defects in the family's position. They are signs that a different planning instrument fits better, and a candid adviser says so early.

Hypothetical scenarios

The following situations are hypothetical. They involve no real clients, companies or outcomes, and each is chosen to show a trade-off rather than a result.

Hypothetical 1: an IDF allocation across diversified private equity

A family funds a policy with cash over several years and allocates to an insurance-dedicated fund that commits across a dozen buyout and secondaries funds. Diversification testing passes comfortably through look-through; the IDF manager handles calls and distributions; the family reads quarterly reports and makes no investment decisions. The trade-off is the point: the family accepted fund-level fees and gave up all say in sponsor selection, in exchange for private-market compounding inside the policy without annual tax events and without control risk. This is the base case that works, and its cost is exactly the control surrendered.

Hypothetical 2: minority private stakes in a managed account

A larger policy uses a separately managed account whose independent manager may hold minority positions in private companies, capped at levels that keep every quarterly test comfortable. The manager sources a position in a sector the family knows well, and the family learns of it in the next report. Two consequences follow. The account gains differentiated exposure with independent valuation and mandated concentration limits; and when a family member later hears of a company she would like the account to buy, the answer must be no, because a suggestion channel is how managed accounts become owned accounts in the Webber sense. The mandate's value depends on the family's discipline in leaving it alone.

Hypothetical 3: a controlling acquisition declined

Advisers to a family propose that a policy account acquire 80 percent of a profitable distribution business through a new SPV. On review, the structure fails three ways at once. Look-through collapses the SPV to a single issuer, breaching the 55 percent limit at the next quarter end. Governance has no honest answer: the sponsor is thin, and the family expects board influence. The carrier declines the asset on valuation and exit grounds before the tax analysis is even finished. The family completes the acquisition outside the policy, which was the right result: the policy remains an investment structure, and the operating company gets ownership that can actually run it.

Hypothetical 4: a founder before a liquidity event

A founder expecting a sale in two to three years asks whether her shares can go into a policy first. Counsel explains that transferring the appreciated shares would itself be a taxable disposition, that a sale to the account at fair value would face related-party and prearrangement obstacles, and that the carrier would refuse the concentration regardless. The genuine plan is narrower: fund a policy now with cash, let independent managers invest it, and treat sale proceeds later as a source of further premium within MEC limits. The founder gains a compliant long-term structure but shelters none of the gain already built into her shares, because nothing lawful would.

A 12-step decision framework

Families that reach good outcomes tend to work the questions in order, because each step can end the analysis before costs accumulate.

1. Define the family's tax and succession objectives before discussing any asset.
2. Identify every relevant jurisdiction: residence, citizenship, asset location, likely moves.
3. Determine who will own the policy: individual, trust or entity, with estate treatment in view.
4. Decide whether the desired exposure is direct or fund-based, and prefer fund-based where possible.
5. Test investor control: could anyone honestly describe the family as selecting investments?
6. Test diversification against Section 817(h) arithmetic or the carrier's own standards.
7. Test valuation: who values, how often, and would an auditor accept it?
8. Test liquidity: charges, calls and loans against the account's realistic cash flow.
9. Obtain carrier approval in writing for every unusual asset class before funding.
10. Obtain independent legal and tax advice in each relevant jurisdiction.
11. Model all-in costs and downside cases, including lapse and forced-sale scenarios.
12. Confirm operational governance, reporting and conflict procedures before the first premium.

The principle that governs everything above

PPLI can provide access to private companies and to the full range of institutional alternatives, and for families with the right horizon and discipline it does so with an efficiency few other structures match. But the policy is not a personal acquisition vehicle, and it rewards families in proportion to their willingness to accept that. The more concentrated, controlled or operational the asset, the more the outcome depends on structure, manager independence, valuation, carrier approval and jurisdictional analysis, and the earlier those questions are asked, the cheaper the answers are. A family weighing a specific asset, a coming liquidity event or an existing business against this framework will get further in one structured conversation with specialists than in months of general reading.

Request a Confidential PPLI Review

Sources

• Internal Revenue Code, Sections 101, 7702, 7702A and 817(h)
• Treasury Regulation §1.817-5
• IRS Revenue Rulings 2003-91 and 2003-92
• IRS Revenue Rulings 77-85, 80-274, 81-225 and 82-54
• Webber v. Commissioner, 144 T.C. 324 (2015)
• Investment Company Act of 1940, Sections 2(a)(51), 3(c)(1) and 3(c)(7)
• SEC Regulation D, Rule 501
• Jefferies, Global Secondary Market Review, January 2026
• BlackRock, 2026 Private Markets Outlook

This article is for informational and educational purposes only and does not constitute legal, tax, investment, or insurance advice. Readers should consult qualified professionals before making any decision.