Purpose
We have been asked countless times why we created Castle Re.
It is a great question and one that deserves an answer. We know exactly why we put Castle Re together. Articulating the same so everyone else understands why, however, is not such a simple matter. Let’s start with why we chose Castle Re or as we prefer to call the company “CastleRE”. The RE stands for RE-inventing, RE-thinking and RE-focusing on how cash value life insurance should be used to constructively help the high net worth client do a far better job with his or her overall estate and financial planning. It is commonly understood that the product of life insurance is a mystery and a frustration for far too many people. It was time to re-think the entire issue of life insurance and find a way to eliminate that mystery and frustration so the vast potential of the concept of cash value life insurance could be used constructively to help high net worth clients do a far better job with their estate, business and financial planning. The legal and tax background of the principals behind CastleRE was instrumental in this process.
CastleRE was formed by two tax lawyers who collectively have over 50 years of tax law experience. Much of that experience has dealt with life insurance, both international and domestic, and with estate and business planning also both international and domestic. Rather than write up a traditional Mission Statement we decided a simple Q&A format would be more helpful. So we are going to ask ourselves four questions. We hope our answers will help you to understand the purpose behind CastleRE.
Thank you:
Pete Moison, JD, TEP
Q: Do you see life insurance as a policy that must be sold to the public?
No. As a matter of fact that was a source of great frustration while practicing law. Attorneys do not sell products. Rather they sell a service. The service is to listen carefully to the client, ask questions, and develop a specific plan to help the client. The plan must be consistent with the client’s objectives and be specifically designed for the client. If the client agrees the plan solves his or her objectives then the attorney and the professional advisory team goes to work to prepare the contracts, wills, trusts, and other documents necessary to finalize the plan. The contracts and documents used must be specifically designed and drafted to meet the client’s unique objectives. When it came to life insurance the client was forced to buy a life insurance policy. We had no control over the content or design of the policy, its costs or benefits.
To be most helpful to the client we needed more control over the terms of the life insurance contract including pricing, the design of the death benefit, the reserve, and some of the black and white of the contract language. The insurance companies would not yield on these issues. To be fair insurance companies in the U.S. are subject to a vast amount of regulation. However, at its core a life insurance policy is just a contract and it is a contract that can be drafted to meet the specific needs of each client.
Q: How do you take the mystery out of cash value life insurance?
By first asking the client and the client’s advisor to forget everything they know or think they know about cash value life insurance and start with a clean slate. This includes trying to eliminate any prejudice they have towards life insurance. We know we are asking a lot by doing this. But is necessary. There are really only 3 components to a life insurance contract: the overhead cost to the insurance company; the cost to insure the risk; and the reserve or cash value investment component. That is it. Not much mystery there. The first two items (the overhead and risk cost) can be guaranteed. Further the overhead cost can and should be a negotiated and fully disclosed and transparent item. With respect to the risk cost that cost should also be very transparent. As a company we do not believe a profit factor should be built into the risk component. That leaves the investment component. We maintain if the cost components of the insurance contract can be guaranteed then the design of the investment component can and should be much more effective and efficient. What is little known is the investment part can be delegated to an independent investment manager.
Q. When do you need the death benefit of life insurance?
That is one of those questions where the answer depends on why the advisor has recommended life insurance to be part of the plan. In simple terms, however, if the client can qualify for life insurance then it is a pretty safe bet the client is going to live a long time. An insurance company is not going to take on the risk if it likely the client is going to die anytime soon. Given odds are extremely good the client is going to live a long time then the design of the insurance contract probably should be one that delivers the maximum death benefit when the client needs it the most—late in life.
Q. What do you see as the role of CastleRE?
In simple terms CastleRE is a custom manufacturer of life insurance contracts. CastleRE does not sell life insurance policies. Rather it works with the professional advisors to help custom design, draft and implement tax compliant contracts of life insurance. If we are going to be true to our purpose then we cannot operate using static policy forms. We must be able to help the professional advisor design and execute a life insurance contract that is consistent with the advisor’s advice and solves the client’s planning objectives. Our Turks and Caicos location allows for this luxury.
Q. Why Turks and Caicos and what is the U.S. tax impact?
Turks and Caicos is the third largest insurance jurisdiction is the world. Its laws are excellent, has a tremendous pool of professional talent, and the regulation is focused on company solvency and not on a static one size fits all policy form. This allows CastleRE to be able to custom design and implement each custom life insurance contract or CLIC. We located in Turks and Caicos for these reasons. The Turks and Caicos location also allows the company to help international clients as well. From a tax standpoint, however, CastleRE is treated as a U.S. life insurance company. CastleRE filed a 953(d) election with the IRS and files a U.S. income tax return. The 953(d) election means, among other things, that no federal excise tax is charged against premiums paid into a CastleRE life insurance contract.
Being in Turks and Caicos means the client has a safe jurisdiction, a jurisdiction that allows for custom contract work, and the 953(d) election means we operate in a manner compliant with the Internal Revenue Code. We want a successful outcome for every client.
Our Mission Statement
And The Tale of the Squirrel Proof Bird Feeder
CastleRE was founded on the firm belief that there was a much more effective way to utilize cash value life insurance to help clients than the traditional product and policy offerings that are marketed and sold in the traditional US and global life insurance marketplace.
We believe the only way cash value life insurance can absolutely help is if it is viewed as a concept first. A concept that is then developed into a contract of life insurance that is consistent with the advice provided by the client’s professional advisors. CastleRE is committed to helping the client's advisors with this process.
From Bermuda, Castle Re Insurance Ltd has the unique capability to customize insurance contracts and insure risk for families and individuals from more than 120 countries globally. Castle works with advisors on multi-jurisdictional fronts in an effort to meet the diverse needs for each client. This single point of contact and dynamic relationship with Castle provides attorneys, advisors, banks, trust companies and others the highly unique capability to work most efficiently with a global insurance company that has the capacity and expertise to provide compliant insurance contracts for their respective clients on a multi-jurisdictional basis.
We are approachable and available to work closely with the professional advisors in designing each contract of life insurance fro the unique needs of each of their valued clients.
REthink, REfocus, and REinvent: Advised and Custom Drafted Life is the result and is the New Standard to take life insurance from concept to a contract that works.
The Squirrel Proof Bird Feeder
Someone asked the other day why we are so committed to a particular course of action. That course of action is when it comes to planning for the high net worth client life insurance must be looked at and utilized in a very different manner. In order to do this the perception that life insurance can only be obtained by purchasing the product of life insurance from a life insurance agent must be eliminated. That is a difficult task and we understand it is very difficult to change that perception.
Was at a college graduation a while ago for my niece. The commencement speaker was a graduate of the college my niece was attending. He went on to become one of the best college basketball coaches in the U.S. He told a story about a squirrel proof bird feeder. No such thing, right? The squirrel will always find a way around whatever it is that is suppose to make the squirrel proof bird feeder squirrel proof. The squirrel wants that seed and the squirrel will not stop trying to figure a way around the barrier until he gets to the seed. Well that is the way we are. You cannot get to the seed of the concept of cash value life insurance until you find a way to work around and do away with the perception that cash value life insurance must be a sold product. Just because we grew up with that understanding does not make it an absolute.
There is no question for many, many people the product of life insurance is fine. But if you are a high net worth client who wants and needs a life insurance plan to help complete your long term estate and financial plan the product of cash value life insurance is the squirrel barrier to accomplishing your plan. That barrier must be eliminated to get to best parts of what cash value life insurance can do for you. We want you and your advisors to get that seed and we will not stop until we succeed. That is why we do not sell life insurance policies and why we have no life insurance agents.
Cash Value life insurance as a concept, simply put, can help solve more of the long term estate and financial planning issues that confront the high net worth client than any other concept. But just like any other concept, the concept of cash value life insurance needs to be molded to meet the unique needs of each client, one by one. You cannot do that with a pre-packaged product.
Can you imagine what your reaction would be if your tax attorney or financial advisor tried to sell you a pre-packaged trust product or pre-packaged financial plan? You would high tail it out the door. You cannot draft a trust document or implement a comprehensive financial plan until you know what the client wants to do and there is an agreement on how to do it. Only then can the drafting begin. The contract that makes life insurance work should be no different. A policy is a product the terms of which are already drafted before the client walks in the door. A custom plan of life insurance is settled into a unique contract only after it is understood what the client wants to do and there is an agreement on how to best accomplish those goals. Simply put this means the contract drafting starts after the plan is agreed on.
The barrier to unlocking the potential of cash value life insurance is the perception that cash value life insurance can only be procured as a product. To get to the best part of cash value life insurance, just like the squirrel, you have to decide you want and need to get around that barrier. We know how to break down that barrier. That is why we are so committed to what we do.
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Firm Philosophy, A different approach to Life Insurance
Cash value life insurance, in particular variable life insurance, has the potential to help solve more estate and financial planning issues than any other single planning tool.
Sounds like a pretty bold statement for a product that has left a lot of people out in the cold. It is a bold statement, but it is also an accurate one. At CastleRE we do not talk product and we do not sell life insurance policies. We talk concept and how we can help professionals maximize the benefits of the concept of life insurance for their clients.
Life insurance must be approached in a very different way if it is to help efficiently and effectively solve many of the estate and financial planning issues confronting the high net worth client. As a planning concept it has the ability to solve more of these issues than any other single planning concept. CastleRE must work with the professional advisors to help design and integrate the benefits of the concept of life insurance into a final contract of life insurance. A contract that is specifically created for each client based on the unique objectives of that client. There is simply no reason why the final contract of life insurance cannot live up to the unmatched potential of the concept of life insurance.
Our use of the phrase “variable life” is not to be confused with the marketing term of variable life used by other life insurance companies. Variable life is first and foremost a tax term and refers to the type of life insurance company that segregates the cash value of each life insurance contract into its own creditor protected account. CastleRE protects a client's cash value through such segregation. The U.S. tax code calls such a contract of insurance a variable contract of life insurance or a variable annuity contract. CastleRE's Advised Custom Life Insurance Contracts or CLICs are not to be confused with private placement or variable life insurance (PPVUL or PPLI) policies marketed by U.S. life insurance companies. Those policies represent something completely different.
A CastleRE Advised and Custom completed life insurance contract is a tax compliant insurance contract designed, drafted and implemented solely for the client. CastleRE does not do rack policy work. We practice life insurance similar to the way attorneys practice law. Work with the advisory team; listen carefully; and then design and implement a true custom life insurance solution.
We believe you will conclude the concept can be turned into a reality.