Indexed universal life plans hit the sweet spot among wealthy and mass-affluent clients

[SINGAPORE] Universal life (UL) policies have long been the mainstay of high-net-worth (HNW) insurance, but a variant that offers market exposure with downside protection appears to hit the sweet spot among wealthy clients.

Some insurers report increasing take-up of indexed universal life (IUL) policies with a larger sum assured to boot. Manulife recently issued a US$300 million policy for a single client that may well be the largest to date in Singapore and in the region.

In the last 12 months, it issued 25 individual policies each valued at more than US$50 million. Between 2024 and 2025, sales rose by 40 per cent in this segment of policies.

Demand for such jumbo policies is driven by rising wealth creation in Asia-Pacific and with that trend, a growing need among asset owners for wealth preservation, stability and tools to enable an equitable distribution to HNW families’ heirs.

Vincent Eck, head of key accounts and origination (Apac ex-China) at Swiss Re, earlier noted that in traditional HNW products, “significantly larger cases” are being placed, “both in sum assured and net amount at risk ceded to reinsurers, increasing the importance of reliable long-term capacity and underwriting support”.

“Regular premiums have increased with requested case size support reaching up to US$200-300 million per case, reinforcing the need for reinsurers with strong balance sheets and large-case experience,” he said.

As a category, UL life policies lend themselves to multi-generational wealth and legacy planning for a few reasons.

In addition to an immediate estate, they provide liquidity on death because they are not subject to the probate process. Almost all insurers allow a change in the life insured to enable the policy to last more than one generation. The death benefit can be paid in a lump sum or in instalments.

Havend chief executive Eddy Cheong said: “When one is planning for legacy gifting, it is important that the insurance policy pays out no matter how long one lives. Term insurance is not suitable, because it cannot survive beyond 100 years old.”

Whole life or UL plans can cover up to age 120.

IULs: some market upside plus stability

Traditional UL policies, which have been in the market for decades, generate returns via a fixed crediting rate. Interest in this has waned, giving way to IULs, which are seen to offer the best of two worlds – a stable return plus some market upside.

Premiums are typically divided into two accounts. One is a fixed account that earns a fixed crediting rate of roughly 2 per cent a year. The second is an index account where clients can pick their desired exposure. The downside is typically protected with a floor of zero, and this may be guaranteed. The upside is typically capped depending on the indexes chosen.

Since clients can vary the allocation of premiums between the two accounts, those who are risk-averse may well put 100 per cent into the fixed account, which makes it like a traditional UL policy.

Manulife Singapore chief product officer Frank O’Neill observed a “notable rise in demand” for IUL solutions, reflected in the growing number of insurers entering the space. “Over the past 12 months alone, more than five major insurers have launched or enhanced their IUL offerings…

“In today’s uncertain market environment, coupled with clients’ continued desire for market participation, there is growing demand for solutions that offer a balanced combination of protection, flexibility and long-term financial goals, particularly for legacy planning purposes. IULs have increasingly become the preferred option, offering a more cost-efficient way to achieve these objectives while providing downside protection and upside participation in markets.”

Sun Life Singapore chief executive Christopher Albrecht said: “We’re working with reinsurers to increase our death benefit capacity to over US$250 million per individual due to increasing market demand from ultra HNW clients.”

For Sun Life, the mainland Chinese visitor segment is showing the fastest growth.

Transamerica Life Bermuda chief commercial officer Brandon Szeto said the firm has seen an an increase in applications in excess of US$10 million of sum assured.

“The underwriting of large policies requires evaluating the client’s medical, financial, avocational, travel and residence status as well as internal due diligence,” he added.

Issuance may take a few weeks or longer for some complicated cases.

AIA Singapore’s Irma Hadikusuma, chief marketing and healthcare officer, said: “We’re seeing a clear evolution in how HNW clients view insurance, not just as protection but also as strategic capital within a broader wealth portfolio. Growing interest in IULs reflects a more sophisticated approach to risk, where clients seek downside protection alongside structured market participation.

“As wealth creation accelerates across Asia, the opportunity in the wealth segment is significant and diverse, and big enough for multiple solutions and players to thrive.”

Not just for the ultra wealthy

But IULs are not just for the wealthy. While some insurers set the minimum sum assured at US$1 million to US$2 million, Singlife and Great Eastern have set the minimum sum assured at US$250,000.

Singlife’s group head of products Helen Shen said that as Singapore customers grow in sophistication and focus on value beyond guaranteed rates, “we expect IUL adoption to continue outpacing traditional ULs”.

A Great Eastern spokesperson said interest in IULs is growing beyond the HNW segment, “driven by rising demand for legacy planning, wealth preservation and cross-generational wealth transfer among affluent and mass affluent customers”.

The availability of flexible premiums also helps access, he added.

Prudential has “observed occasional large sum assured cases though this remains uncommon”, said Tan Wei Perng, head of product strategy and innovation.

Competition centres around specific features such as the number and types of indexes clients can select for the index account, as well as the cap rate. In general, the higher the cap, the greater the potential return. Some insurers have begun to offer uncapped returns on an index. Manulife’s Signature Indexed Universal Life (III), for instance, has no cap rate for a specific index and a participation rate of 135 per cent.

For the fixed account, some insurers offer a sweetener for the first year – a guaranteed crediting rate of 4.2 to 4.3 per cent, after which the crediting rate may be set at 2 per cent.

For AIA’s IUL, the crediting rate for the first three years is guaranteed at 4.3 per cent on the initial premium. The minimum guaranteed rate in subsequent years is 2 per cent.