54. SVUL - the VUL with principal guarantee?

 

As former head of business development for a life insurance company, one of my job function is to be involved in product development for both our main distribution channel (the agency force and Banca) and alternative distribution channels

One of the products that I am very happy to be involved in is the design, development and distribution of Structured Variable Universal Life products (SVUL)

What makes it more memorable is the opportunity to have worked with a great team - Philip and Li yen (our main investment bankers), Joh-an of marketing - to ensure we got our story right and Candy- our actuary who ensures we got the pricing right for the best benefit of our policy holders

SVUL are limited offer products, usually denominated in US dollars as the investment components are usually sourced abroad in partnership with a global investment bank

The product concept is very straightforward, it combines 3 main elements, the standard 125% life insurance cover, a structured portfolio combining the 100% maturity of a Zero Coupon Bond (this is the principal guarantee) and a call option on an equity position (this provides the upside) on the most exciting investment theme for the day

We developed and launched around 14 in such diverse themes as a China Growth Story, a play on energy, a position on Euro stocks during the PIGs crisis and a lot more, the last one that we developed but was never introduced to the market was a play on the world's top brands, I heard later that the private bank that we have develop this product for went ahead with another partner and did quite well

Some designs I saw on the market only provides 80% principal guarantee, the idea here is to allocate more to the upside component by saving on the cost of the bonds, these I  think takes away the beauty of an SVUL which is a VUL with principal guarantee