What Can PPLI Own? Private Companies and Asset Rules

PPLI can give a family exposure to private companies, usually through eligible funds or approved managed accounts. What it cannot do is let the family move its own business into a policy, keep running it and stop paying tax. Every proposal needs the insurer to accept the asset, a clear map of who legally owns what, tax analysis, diversification testing, a defensible valuation and enough cash to meet the policy's obligations. Keep two numbers apart from the start: the percentage of the company being acquired and the investment's share of the policy account are different measurements. Look at both, and at who will make the investment and governance decisions, before any acquisition or transfer.

Jefferies' review of the 2025 secondary market reports USD 240 billion of transactions, up 48% from 2024. GP-led volume was USD 115 billion, up 53%; average continuation-vehicle size was about USD 900 million, and single-asset vehicles exceeded half of continuation-vehicle volume. Those figures describe the whole market, not what sits inside PPLI policies. BlackRock's 2026 Private Markets Outlook discusses companies staying private for longer while exits are constrained, and the growing role of private credit and secondaries in financing and liquidity. Both reports explain why families are asking about private assets; neither tells you what a particular insurer will accept.

The practical questions differ across diversified funds, minority private stakes, controlling acquisitions and the family's own business. Being private does not make an asset eligible, and a growing market does not answer the policy's eligibility tests. Begin with what private placement life insurance is and how policy rights, accounts and mandates fit together, then assess the actual proposed holding.

Who legally owns the assets

The policyholder owns contractual rights, which may include cash value, withdrawals, loans and beneficiary designations subject to the policy. Map the issuer's interest in each investment separately: an account is not necessarily a separate legal person, and a fund or portfolio company may own the underlying operating assets. Identify voting rights, management authority and custody at each level. For US treatment, section 7702 generally requires insurance status under applicable law and either the cash value accumulation test or guideline premium requirements plus the cash value corridor. Tax ownership and diversification remain separate questions.

Role	Who	Rights and responsibilities
Policyholder	Individual, trust or other eligible owner	Contract rights and permitted choices; no assumption of direct ownership of portfolio assets.
Insurance issuer	The issuing legal entity and relevant account structure	Policy obligations, permitted investments and administration under law and contract. Identify title at each layer.
Investment manager	Appointed manager or fund sponsor	Investment powers and governance under actual documents and conduct; independent title alone is insufficient.
Custodian	Approved bank or other custodian where applicable	Custody and records at the account or fund level. Private share registers and underlying company assets may involve other holders.

Then check the map against what actually happens. A contract can give the manager full discretion on paper, but if the holder steers investments through instructions, intermediaries or prearranged transactions, the IRS can treat the holder as the owner. Likewise, a custody statement shows where assets are held, not who votes the shares or receives the distributions. Write down the rights that actually operate and who exercises each one.

An asset map: routes to investigate and constraints to resolve

The tables below take the main asset categories one at a time and set out possible routes, what each route is for and what to check. Read them as a map for discussion, not a list of approved investments or products on offer. Applicable law, tax residence, citizenship and issuer terms can all change the answer. Valuation, liquidity and control are worth asking about in every jurisdiction, but the legal tests differ from country to country.

Common institutional assets

Asset class	Possible route	Objective to assess	Constraints
Cash and equivalents	Account cash or permitted instruments	Payments, calls and a liquidity reserve.	Counterparty, currency, yield and concentration; cash is not automatically exempt from testing.
Government and corporate bonds	Managed holdings or eligible funds	Contractual income and potential liquidity.	Default, duration, pricing and issuer concentration; not every bond trades daily or avoids all underlying tax.
Listed equities	Managed account or eligible fund	Equity participation and observable market prices.	Trading depth varies; independent selection and account diversification still require review.
Collective funds, where permitted	Issuer-approved funds under applicable law	Pooled management or exposure.	Public access, tax ownership and look-through are separate tests. Do not infer a worldwide prohibition or approval.
Insurance-dedicated funds	A properly structured, accepted vehicle	A vehicle designed for insurance-account investment.	Permitted-holder exceptions, actual holdings, fees and conduct matter; the IDF label proves no result.
Separately managed accounts	An accepted discretionary mandate	Mandate and reporting tailored within permitted limits.	Selection and appointment powers, communications, costs, custody and valuation require review.

Alternative investments

Asset class	Possible route	Objective to assess	Constraints
Hedge funds	Eligible dedicated structure or fund exposure	Model tax timing for the actual strategy.	A renamed share class is insufficient; access, gates, side pockets, fees and underlying taxes remain relevant.
Private equity funds	Accepted funds, feeders or fund-of-funds	Long-term company exposure.	Calls, layered fees, valuation lags and common issuers; no guarantee of tax-free underlying activity.
Venture capital funds	Eligible venture funds or diversified fund structures	Early-stage business exposure.	Failure risk, estimated values, long holds and issuer concentration.
Private credit	Eligible credit fund or managed loans	Potential contractual income.	Default, payment-in-kind accruals, workouts, valuation and cash timing; not automatically the best policy asset.
Infrastructure	Approved investment interests	Exposure to long-lived assets or businesses.	Cash flows and liabilities may not match policy needs; construction, regulation, valuation and exit risks.
Real estate funds	Eligible funds or separately assessed direct interests	Property income or capital exposure.	Local rules, property taxes, leverage, valuations and personal use; no universal direct-property permission.
Commodities	Permitted funds, contracts or managed exposure	Commodity-related returns.	Aggregation, derivatives, margin, custody and local asset rules; correlations and tax profiles vary.
Structured investments	Permitted notes or other instruments	A specified contractual payoff.	Issuer credit, concentration, payoff terms, embedded costs and exit pricing.
Secondaries	Accepted fund or other eligible investment	Existing private-asset exposure and a different cash-flow profile.	Shorter duration, discounts and early distributions are possibilities, not guarantees.
Co-investments, where permitted	Independently assessed investment alongside a sponsor	Deal exposure and negotiated economics.	Fees are not always lower; conflicts, selection, issuer aggregation and control need review.

Private and operating-company interests

Interest	Possible route	Objective to assess	Constraints
Minority shares in private companies	Eligible fund or manager-selected approved position	Private business exposure.	Minority status does not remove governance, valuation, liquidity or concentration issues.
Preferred shares	Accepted fund position or permitted instrument	Contractual priority or distribution rights.	Priority does not guarantee recovery or cure valuation uncertainty; examine conversion and related-party terms.
Convertible securities	Permitted manager-selected instrument	A debt or preferred claim with conversion features.	Credit, dilution, seniority, conversion, pricing and issuer concentration.
Private debt to companies	Eligible credit fund or permitted loan	Contractual payments.	Cash may be delayed or accrued; related parties, collateral, defaults and control require review.
Fund-owned operating companies	Accepted buyout or growth fund interest	Company exposure with governance at fund or company level.	Map title and actual holdings; fund-level control does not automatically establish tax compliance.
Controlling equity interests	A specifically reviewed and accepted structure	Controlling economic exposure.	Account weight, voting and appointment rights, tax ownership, valuation and exit. No general carrier acceptance asserted.
Acquisition vehicles	An eligible SPV, partnership or other interest	Transaction administration or legal separation.	Liability protection depends on law and terms. A single underlying company does not become diversified through a new entity.
Family-owned or related businesses	A proposal requiring specific legal and issuer review	An identified business or succession objective.	Employment, votes, loans, conflicts, prearrangement, value and personal benefit. No approved formula is implied.

Insurance-dedicated funds and private-market exposure

An insurance-dedicated fund must be assessed through its actual legal form, investor access and operations. 26 CFR 1.817-5(f) provides conditional look-through treatment for specified entities and permitted holders; it does not make every fund with an IDF label compliant. Revenue Ruling 2003-92 separately addresses tax ownership where interests are available outside insurance. Registration exclusions under Investment Company Act sections 3(c)(1) and 3(c)(7) and securities-offering exemptions address different requirements. Identify which the actual vehicle relies on.

Rule 501 defines accredited-investor categories. Rule 506 distinguishes, among other conditions, the nonpublic 506(b) route from 506(c), which requires accredited purchasers and reasonable verification. Separately, section 2(a)(51) includes an individual qualified-purchaser category based on at least USD 5 million in defined investments. Each is a separate test, and none of them is a statutory minimum premium for PPLI. Apply the rules that fit the actual entity, ownership and offering.

A fund can be designed to consider private equity, private credit, secondaries or other strategies, subject to approval and compliance. The manager's discretion, appointment arrangements, communications, valuations and liquidity must support the proposed operation. Choosing among broad allocation options is one thing; picking the underlying deals is another, and the holder may not do it. See hedge fund strategies in PPLI and private-credit exposure. Check the facts on each testing date and again whenever conduct changes. A well-chosen product name offers no protection on its own.

Separately managed accounts: custom mandates, same discipline

An issuer may offer a separately managed account if its contract and operational requirements permit it. Obtain the actual mandate: asset scope, concentration limits, liquidity, valuations, custody, reporting, appointment and removal rights. Be careful if the family wants to nominate the manager or line up investments before the policy is issued: both can have investor-control consequences. Revenue Ruling 2003-91 addresses selection and communication facts as well as trade decisions. Confirm which allocation choices the holder may make and who accepts responsibility for each instruction.

For a US analysis, distinguish permitted contract choices from selecting securities, arranging a target acquisition or directing a manager through another person. Review the equivalent conduct under the rules of every other relevant jurisdiction and under the contract. An approved mandate is the insurer's investment arrangement; it does not make the family the owner of the investments. Private-asset valuations, custody and reporting must follow the documented arrangements, which can involve several entities and reporting recipients.

Can PPLI invest in private companies?

Private-company exposure can take several forms. Review each interest separately against issuer acceptance, the governing law, tax ownership, concentration, valuation, liquidity and authority to act. The eight categories in the table each need their own review, and no insurer should be assumed to offer all eight.

A private equity or venture fund can put distance between the policyholder and company governance. Adding a fund layer does not, however, make the exposure eligible or diversified by itself. Identify actual holdings and permitted look-through. For lending, model borrower defaults, payment timing and any payment-in-kind interest; a high stated yield may not provide cash for charges. Compare private equity in PPLI with direct ownership under the same assumptions.

Minority and pre-IPO interests require a supported value, acceptable transfer restrictions and compliant selection and control. A family's wish to obtain one named company is materially different from receiving exposure through independently run investments. Co-investments raise further questions about sponsor conflicts, fees, allocation and issuer aggregation, and an independent sponsor does not answer all of them. Record both the account's share of the company and the position's share of account value.

Can PPLI buy an entire company?

A fund held through a policy may itself acquire operating companies, with governance at the fund or company level. A proposed direct controlling position or acquisition vehicle needs separate approval and legal analysis. Determine the asset the insurer would acquire, voting and appointment rights, leverage, transfer restrictions and responsibilities after closing. Calling it a managed account or wrapping it in an SPV does not make it acceptable. This article does not describe any carrier offer to acquire a particular business.

Control requires an identified decision-maker for votes, boards and management. Family involvement can create investor-control and conflict issues. Concentration is a separate calculation based on the investment's value relative to the tested account, not the percentage of the company acquired. Borrowing can introduce covenants, collateral and consent requirements; valuation frequency follows the accepted process, not an assumed annual limit. Trace dividends and exit proceeds through the correct owners and policy terms. Identify every necessary company, fund, issuer and custody consent.

Resolve control and acceptance before anyone asks a policy account to buy a chosen business. A proposal can pass the concentration arithmetic and still fail on governance, or have an independent manager and still be too concentrated. The fact that a company is private tells you what kind of asset it is, not whether it belongs in an insurance policy.

Can a founder place an existing company into a policy?

Moving appreciated shares into an insurance arrangement does not itself erase their existing gain. Section 1001 generally recognizes gain on a disposition unless another rule supplies relief. Section 1035 concerns specified contract exchanges, not a general stock-for-policy exemption. Find out whether the insurer would accept the shares in kind at all, and how the transfer would be taxed. If some other statutory exclusion or transaction rule might help, it has to be analyzed on its own facts; the policy does not supply that relief.

If a founder proposes a sale at fair value to an account, examine related-party interests, prearrangement, actual control and the valuation evidence. A fair price is necessary but does not deal with any of those issues. Calculate concentration from account values, not from the founder's personal balance sheet. Check securities-law requirements, shareholder agreements, company consents and the issuer's underwriting requirements. Until the issuer has formally accepted the asset, a willing manager or a draft purchase contract means little.

Company tax classification can be decisive. Section 1361(b)(1)(B) restricts S corporation shareholders, subject to specified exceptions. A proposed insurer or fund shareholder may be ineligible. Check permitted ownership and consequences before transferring shares; an insurance policy does not override the company's tax-status requirements.

Pre-liquidity planning can instead assess insurance for separate cash, independently of any later company sale. Future premiums need available after-tax proceeds and contract testing, including section 7702A where US MEC treatment matters. Starting early helps with timing, but it does not rescue an investment that has been prearranged. Compare the policy with other feasible tax, succession and investment choices before a binding commitment.

Family-owned and related companies: conflicts and retained rights

For a related business, list family employment, board seats, management powers, votes, loans, transactions and personal use of assets. Determine whether these allow control over the policy investment or extraction of benefits. Related exposure is neither always permitted nor always forbidden; the legal and tax consequences depend on the arrangement and how people behave.

Related parties create valuation conflicts, but an independent valuation is still achievable. Insist on a documented methodology, supporting evidence and a conflict process that fits the purpose. Follow each distribution to its legal recipient and analyze any onward payment: money diverted from the company to the family is not simply an ordinary policy withdrawal. An independent manager, fair terms, external valuation, issuer acceptance and manageable concentration all count in the proposal's favor, but even together they are not a safe harbor.

Diversification: the 55/70/80/90 arithmetic

For US variable contracts, section 817(h) and 26 CFR 1.817-5 generally limit the largest one, two, three and four investments to 55%, 70%, 80% and 90% of the relevant account's total assets. The regulation includes quarter-end or following-30-day measurement, conditional startup and other rules. Nondiversification can remove federal insurance treatment for that and later periods, subject to available relief for inadvertent failures. See the 7702 and 817(h) framework.

Count the actual investments under the applicable rules. Securities of one issuer are aggregated; eligible look-through can attribute a vehicle's underlying holdings. An account with two hundred positions can still fail if weights or common issuers breach a limit. A qualifying vehicle owning one business does not create diversification; an entity that does not qualify may itself be one investment. Investor control and access under Revenue Ruling 2003-92 remain separate from this arithmetic.

Separate acquisition-driven concentration from market movements. Section 1.817-5(d) contains a rule for qualifying market fluctuations after compliance. So before ordering a sale because a weight has drifted, check whether that rule applies and what the account has bought since. And remember that an asset the issuer has accepted can still fail the statutory test.

A US taxpayer remains subject to US requirements even if the policy is issued abroad. For other owners, look at local tax law and the issuer's rules; section 817(h) is a US rule and does not travel. Luxembourg Circular 26/1 distinguishes policyholder categories, fund types and permitted assets, with transition provisions for older contracts. Different arrangements face different concentration rules under it. See the Luxembourg policy framework and confirm the actual contract's terms.

Investor control: the doctrine that decides the hard cases

The IRS addresses asset ownership in a line of rulings including 77-85, 80-274, 81-225 and 82-54, discussed in Revenue Ruling 2003-91. Its specified facts include limits on selecting advisers, investments and prearranged portfolios. Being allowed to choose among approved strategies does not mean the holder can also pick the manager or assemble the portfolio before issue. Compare the actual powers and communications with the rulings.

In Webber v. Commissioner, 144 T.C. 324 (2015), the Tax Court treated the taxpayer as owner of supporting assets because of his effective control and benefits, despite formal arrangements. Communications through intermediaries and investment recommendations mattered to the facts. The court's finding was about who owned the assets for tax purposes; the policy itself did not cease to exist. For a company proposal, examine target selection, negotiation, voting, management and personal benefits using the investor-control analysis.

Apply each jurisdiction's own rule. German EStG section 20(1), number 6, sentence 5 attributes specified investment income to the economic beneficiary when the conditions for a separately managed insurance arrangement and asset-disposition control are met. That is a targeted rule about who is taxed on the income, not a declaration that the contract stops being insurance everywhere. Luxembourg's investment permissions deal with a different question altogether. Coordinate the cross-border policy analysis for residence, citizenship and likely moves.

Valuation: the discipline private assets cannot skip

Policy accounting needs values sufficient for the contract's charges, benefits and permitted access. Establish the issuer's accepted valuation policy, frequency, evidence, conflicts and correction process. A fund NAV can include estimates, lagged information or unaudited interim figures, and you may not be able to turn it into cash at that value. Direct positions require an appropriate methodology and evidence, with external expertise where required.

Review stale marks, founder influence, intellectual property assumptions, contingent earn-outs, leverage and distressed positions. Document how a material event between scheduled valuations changes the process. With leverage, a small change in enterprise value can move the equity value a long way. These are the questions diligence should ask; they do not tell you how often insurers turn assets down. Whatever the method, the valuation has to fit its purpose and date.

Liquidity and policy mechanics

Match cash to policy charges, capital calls and possible company funding needs. A cash reserve, realistic distribution assumptions and well-timed premiums help, but a projected distribution is not money in the account. Identify which entity owes each commitment and what happens if it cannot pay. Include currency, settlement and default provisions in the cash schedule. Review policy costs and economics alongside the investment documents.

Loans require contract availability, collateral, interest and a repayment or exit plan. Under section 72, non-MEC and MEC treatment differs; MEC distributions and loans generally reach gain first, with a possible additional tax unless an exception applies. A lapse or surrender with outstanding debt can generate taxable income. Illiquidity can force difficult sales or other funding measures, and the discount and timing will depend on the asset and the market at the time. Model charges, loan limits and death-benefit effects using the policy-loan review.

Deferral at the policyholder level does not stop tax being paid further down, by the companies, funds and investments themselves. Model corporate taxes, withholding, fund expenses and distributions where applicable. Qualifying death proceeds are generally excluded from income under section 101, subject to exceptions; estate inclusion is separate. Compare net surrender and beneficiary outcomes, not only account values.

Carrier and provider due diligence

Compare actual issuer and investment documents, including what happens when an accepted position later becomes difficult to administer. The carrier due-diligence review provides context. Record a responsible party and supporting document for each question below.

Conditions supporting further assessment

Further assessment may be warranted where a real insurance need, investment horizon, tax profile, costs, independent decision-making, diversification and cash resources support the proposal. Multigenerational objectives can be relevant, but no level of wealth or family profile makes PPLI right on its own. Compare feasible alternatives, including direct ownership. See who PPLI may suit and PPLI within wider wealth management.

When it may not

Reasons to decline or redesign include desired personal control, unacceptable concentration, imminent liquidity needs, unsupported valuations, excessive costs, personal-use plans, missing issuer acceptance or uncertain local recognition. A pending sale calls for a close look at the actual transaction and any prearrangement, though a separate cash premium can still be perfectly sound. A short horizon or unwillingness to change ownership may make another arrangement preferable. Record why the proposed policy meets or fails the relevant objectives.

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 proposes cash funding over several years and a fund allocating across twelve buyout and secondary funds. It is a promising candidate, but it still has to be proved. Confirm access, look-through, common issuers, weights, manager selection, fee layers, calls and cash reserves. Real manager discretion supports the intended operation, but investor-control risk remains if the family's conduct undermines it. Compare after-tax outcomes with direct fund ownership and test future premiums.

Hypothetical 2: minority private stakes in a managed account

A proposed managed account permits minority private stakes within specified limits. Its manager sources a company independently and reports the position afterward. Verify that appointment, pricing, reporting and investment conduct support the intended tax treatment. If a family member later proposes another target, stop and review the communication before action. A clause forbidding family influence is only as good as the behavior behind it. The example shows a governance process at work; it does not describe an approved account or promise a tax result.

Hypothetical 3: a controlling acquisition declined

A family proposes an SPV acquisition of 80% of a distribution company. That is a share of the company, not a share of policy assets. For a selected example, suppose the attributable single-investment value is USD 8 million in a USD 10 million tested account at the relevant date, with no applicable exception. The 80% account weight exceeds the general 55% limit. If the same investment were worth USD 8 million in a USD 40 million account, its 20% weight would not alone breach that first limit; all other tests remain. In this hypothetical, unresolved family board influence, valuation and exit concerns also lead the issuer to decline. The family evaluates ownership outside insurance.

Hypothetical 4: a founder before a liquidity event

A founder anticipating a sale in two to three years asks about transferring shares first. Counsel must analyze recognition, any separate statutory relief, prearrangement, control, concentration and issuer acceptance. The expected sale date on its own settles none of these. An alternative worth evaluating is a policy funded with separate cash now and after-tax sale proceeds later, subject to contract and MEC testing. Outcomes vary: a carrier might or might not decline, and a transfer might or might not be taxable, and funding early does not by itself make the arrangement compliant.

A 12-step decision framework

Work through the following questions in order. Stop when a necessary condition cannot be met, and keep the supporting evidence for each decision.

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. Identify direct and fund-based routes, compare costs and governance, and determine whether either is feasible.
5. Test investor control: could anyone honestly describe the family as selecting investments?
6. Test the relevant account under applicable diversification law and contract terms, including timing, counting rules and exceptions.
7. Identify the valuation purpose, evidence, independence, timing and correction process.
8. Test cash for charges, calls, claims and borrowing under ordinary and stressed conditions.
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

Private-company exposure in PPLI requires both investment diligence and insurance analysis. Focus on the actual interest, powers, tax treatment, valuation, cash and exit. The more concentrated the position and the more involved the family, the more questions there are, and a more elaborate structure rarely answers them. A well-documented review may support the investment, call for a redesign or rule the policy out, and each of those is a good outcome.

Private-company PPLI questions

Can PPLI own a private company?

Possible exposure must be reviewed through the actual fund or account, issuer terms and applicable law. Asset acceptance, tax ownership, diversification, valuation and liquidity all matter. This article does not point to an approved carrier offer for any particular company.

Does owning 80% of a company breach the 55% rule?

Not by itself. Company ownership percentage and the value of that investment as a percentage of the tested account are different. Calculate the relevant account weight and all applicable concentration tests, then assess control and eligibility separately.

Can a founder transfer appreciated shares tax-free?

PPLI creates no general exemption for existing gain. Determine disposition treatment under section 1001 and any separately applicable rule. Section 1035 is not a general stock-for-policy exchange exemption. Even if a carrier is willing to take the shares, the tax on the transfer still has to be worked out.

Is an independent manager enough to prevent investor control?

No. Appointment rights, prearranged investments, indirect communications and actual conduct also matter. Compare the arrangement with the IRS rulings and relevant case law. A mandate on paper protects you only if the conduct matches it.

Does an offshore issuer remove US diversification requirements?

No. A US taxpayer remains subject to US tax requirements wherever the policy is issued. Identify the owner's applicable rules and the contract's qualification. Other owners and jurisdictions can require different analyses.

Can a fund NAV pay policy charges?

Not directly. A reported value is not available cash. Review redemption, settlement, calls, reserves and valuation lags. A fund can report positive value while the account lacks cash for a payment. Loans require a separate contractual and tax review.

Sources

• 26 USC 101
• 26 USC 72
• 26 USC 7702
• 26 USC 7702A
• 26 USC 817
• 26 CFR 1.817-5
• Revenue Ruling 2003-91, including discussion of earlier rulings
• Revenue Ruling 2003-92
• Webber v. Commissioner, 144 T.C. 324 (2015)
• 26 USC 1001
• 26 USC 1035
• 26 USC 1361
• Investment Company Act section 2(a)(51)
• Investment Company Act sections 3(c)(1) and 3(c)(7)
• SEC Rule 501
• SEC Rule 506
• Luxembourg CAA Circular 26/1
• German EStG section 20
• Jefferies 2025 secondary-market review
• BlackRock 2026 Private Markets Outlook

Updated 17 September 2026. Published by PPLI.com. All four scenarios and selected calculations are hypothetical. This is general information, not an individualized tax, legal, insurance or investment opinion. Read the cited sources and actual contract documents with appropriate advisers. See our editorial standards.