An insurance solution for a very niche demographic

From the online magazine Private Wealth's, an article titled The Next Step In Alternatives:

"One tax management solution, in fact, has come to be recognized by some high-net-worth investors as a perfect complement to their hedge fund investments: private placement insurance—in the form of both life insurance and annuities.

These products essentially allow accredited investors to put alternative investments inside a tax-free insurance wrapper. The products take advantage of long-standing tax rules that allow income earned on assets inside insurance or annuity policies to accumulate free of taxes. Moreover, gains remain tax-free when distributed as life insurance proceeds—as a death benefit or the cancellation of loans made to a policy owner—and tax-deferred if distributed as annuity benefits.

These features are of great value to hedge fund investors, who understand the impact ordinary tax rates have on gains derived from short-term trading and credit-oriented investments, phantom income produced by market-to-market elections by fund managers (often to justify fees), and PFIC treatment of offshore fund investments. Hedge fund investors have learned that taxes paid on current gains are not recovered if losses are suffered in later years. Those losses can only be carried over to future years when or if gains are realized."