Most Americans own 1 life insurance policy. Why do incoming SEC chair Paul Atkins and his wife own 54?
Paul Atkins, President Donald Trump’s nominee to chair the Securities and Trade Fee, is a monetary omnivore. He has fairness in Chinese language tech large Alibaba, holdings in crypto firms, and stakes in enterprise capital companies. And he additionally owns a bulging portfolio of life insurance coverage insurance policies: 54 to be actual, which he holds along with his spouse and household.
That is based on a current ethics disclosure, which should accomplished by company heads (Atkins will doubtless be confirmed as SEC chairmain this week), Members of Congress and different high-level officers.
To place the Atkins’ 54 life insurance coverage insurance policies in context, in 2023, there have been slightly below 260 million energetic insurance policies within the U.S., according to the American Council of Life Insurers—fewer than one, on common, for each American grownup. In the meantime, the life insurance coverage insurance policies represented nearly 10% of Atkins’s internet price, which Bloomberg places at at the least $327 million.
The choice by Atkins to amass dozens of life insurance coverage insurance policies flummoxes even some consultants.
“It might make no sense for a person to have 20, 30, 40, not to mention 50, common life insurance policies on their very own life,” James Carson, a professor on the College of Georgia who researches the insurance coverage market, instructed Fortune. Why, then, does Atkins personal so many?
Fortune reached out to Atkins for remark by way of the consultancy agency Patomak World Companions, the place he’s CEO, however didn’t obtain a reply.
Loss of life and taxes
Maybe the incoming SEC chair’s dozens of life insurance coverage insurance policies are a automobile to scale back the taxes he owes, Timothy Harris, an economics professor at Illinois State College, instructed Fortune.
There are two predominant varieties of life insurance coverage: time period and complete. Time period insurance policies are in impact for a set interval of, say, 20 or 30 years. The latter keep in impact for a policyholder’s life. Every of Atkins’ 54 insurance policies are in the entire class, or a variation of it often called “common.”
Complete life insurance coverage combines a financial savings account with a dying payout. Policyholders deposit cash into their account and obtain tax-deferred curiosity. Once they die, beneficiaries obtain the saved cash, curiosity, and lump sum. “It is much less so about insuring towards untimely dying, and it is extra of an funding automobile,” Harris stated.
For many who haven’t maxed out their contributions to extra conventional retirement automobiles, like 401(okay)s and Roth IRAs, complete life insurance policy aren’t one of the best funding, Harris stated. However “for prime earners which have already exhausted the entire advantages from a 401(okay), you may flip to those complete or common life insurance coverage insurance policies to try to circumvent a few of the taxes,” he added.
Advanced funds—or a speculative wager
Atkins’ hoard of life insurance coverage insurance policies isn’t “a standard factor,” Patricia Born, a professor at Florida State College’s Faculty of Enterprise who research danger administration and insurance coverage, instructed Fortune. However there could also be a proof past taxes, she stated.
The incoming SEC chair’s funds are advanced. He has a number of trusts, sits on the board of a number of firms, and is the CEO of economic consultancy Patomak World Companions. Firms typically grant staff or board members life insurance coverage insurance policies, she stated. “And it might make sense to have insurance policies written particularly to pay to every of these trusts,” she added.
However Carson, the professor on the College of Georgia, believes the handfuls of insurance policies mirror one thing else: a call by Atkins to buy the life insurance coverage of others.
Such transactions should not unusual. In some instances, a coverage holder could determine the premiums are too costly, or that they now not want them to offer for family members. Those that need to dump their life insurance coverage can promote it again to the corporate that issued it for a “give up worth,” or a buyback worth.
Coverage sellers can, although, select to promote to a 3rd get together that provides greater than the unique issuer. In these instances, the third get together would proceed to pay the coverage’s premiums and, if the unique vendor have been to die, obtain the windfall. Those that purchase one other’s life insurance coverage coverage are betting on an individual’s life. Will that individual die quickly sufficient to make the short-term ache of month-to-month or annual charges price it?
Carson is satisfied for this reason Atkins has 54 life insurance coverage insurance policies. “This man clearly likes to have an enormous pool of various investments,” he stated. “And I believe these are investments.”
He pointed to the number of issuers on Atkins’ disclosure doc in addition to the variation in worth of the life insurance coverage insurance policies. Some are price north of $1 million, and others lie between $1,000 and $15,000.
Atkins is presently in entrance of the Senate in a affirmation listening to on Thursday. He plans to or has already divested a big portion of his holdings, however not his life insurance coverage insurance policies, based on an ethics settlement.
This story was initially featured on Fortune.com
