Life Insurance and Private Equity: How to Invest?

In 2024, life insurance accounted for 76% of private equity capital raised from retail investors—or 2.01 billion euros out of the 2.60 billion raised—according to figures from France Invest cited by MAIF. This increase illustrates the growing role of life insurance in providing access to private equity, which was once primarily reserved for institutional investors and high-net-worth individuals.

In practical terms, certain multi-asset contracts now allow investors to invest in unit-linked funds exposed to unlisted companies. This solution can lower the minimum investment amount, simplify administrative management, and allow the investment to qualify for the tax benefits associated with life insurance.

However, this structure does not eliminate the characteristics of private equity. The value of the unit of account is not guaranteed, the underlying asset remains illiquid, and fees can add up. Before investing, it is therefore important to analyze the life insurance contract, the selected fund, and whether this allocation aligns with your overall portfolio.

What Is Private Equity in Life Insurance?

Private equity involves investing in companies that are not publicly traded. Depending on the fund’s strategy, it may finance young, innovative companies, support the growth of established businesses, or facilitate the transfer of ownership of mature companies.

In a life insurance policy, the investor generally does not invest directly in a company’s equity. Instead, the investor selects a unit of account whose value depends on a fund or investment vehicle exposed to unlisted securities.

The insurer specifies the investment vehicle in the policy. The policyholder then holds unit-linked shares under the life insurance policy, while the insurer holds the corresponding assets in accordance with the established legal structure.

This structure distinguishes private equity in life insurance from a direct investment in a FPCI, an FCPR, or another private equity vehicle. The eligibility requirements, cash flows, tax treatment, and exit terms may differ.

How does this investment work?

To invest in private equity through a life insurance policy, you must have a multi-fund policy that offers at least one unit of account invested in unlisted securities. Not all policies provide access to this asset class, and the range of options available varies significantly from one insurer to another.

The policyholder makes a payment or transfers funds to the selected unit of account. The amount invested is included in the policy’s value, but it is not guaranteed by the insurer. Only the number of units of account is guaranteed, not their value, as Service Public points out.

Depending on the vehicle, the exposure can take several forms. The investment unit may invest in a development capital fund, a buyout fund, a secondary fund, a fund of funds, or an evergreen vehicle. These strategies do not share the same time horizon or the same level of risk.

Unlike a direct investment in a closed-end fund, investors generally do not have to manage successive capital calls themselves. The exact terms, however, depend on the contract and the underlying investment vehicle.

What are its main advantages?

Easier Access to the Unlisted Market

Life insurance can lower the barrier to entry for private equity. Some investment vehicles are accessible with amounts lower than the minimum investment amounts typically required for professional funds sold directly to investors.

This accessibility does not mean that all institutional funds become available. Investors have access only to the investment vehicles selected by the insurer and the distributor of their policy.

Life insurance also simplifies certain administrative procedures. The application, valuation, and monitoring processes are all centralized within the policy, which can make exposure to unlisted securities easier for a retail investor to understand.

Take Advantage of the Contract's Tax Benefits

The applicable tax treatment is that of a life insurance policy, not that of directly holding fund shares. As long as no redemptions are made, the gains are not subject to income tax.

When a policy is surrendered, only the portion corresponding to the gains is taxable. The tax treatment depends on the policy’s age, the date of the payments, and the total amount of the premiums involved.

After eight years, gains included in redemptions are subject to an annual tax exemption of 4,600 euros for a single person and 9,200 euros for a married couple or civil union partners filing a joint tax return. Beyond this exemption, the applicable tax treatment depends, among other things, on the amount and date of the payments.

It is therefore inaccurate to state that gains are systematically exempt after eight years. The benefit is based on a tax deduction and specific tax rules, not on a general exemption.

Diversifying Your Asset Allocation

Private equity provides access to companies that are not listed on public markets. This exposure can complement euro-denominated funds, stocks, bonds, or real estate already included in a multi-asset investment contract.

However, diversification should not be confused with an automatic reduction in risk. An investment vehicle may remain heavily concentrated in a specific region, sector, a limited number of companies, or a single vintage.

The quality of diversification therefore depends on the underlying portfolio. It is important to examine the number of holdings, their geographic and sectoral distribution, as well as any other funds that may be held in the portfolio.

Preparing to Pass on Your Estate

Life insurance allows you to name one or more beneficiaries in the event of death. Depending on the insured person’s age at the time of the payments, the amounts involved, and the wording of the beneficiary clause, a specific estate planning provision may apply.

This aspect of the policy’s value represents a significant difference from directly purchasing fund shares. It must, however, be evaluated in light of the policyholder’s personal circumstances and should not be based solely on the choice of an investment unit.

What are the risks and limitations?

Risk of capital loss

Unit-based funds exposed to private equity are not covered by the euro fund guarantee. Their value may rise or fall depending on the performance of the portfolio companies, financing terms, and the valuations used.

A business failure, an excessively high purchase price, or unfavorable exit terms can result in a loss. This loss may be partial or total.

Life insurance provides a legal and tax framework. It does not guarantee the performance of the investment vehicles held within it.

Liquidity That Requires Qualification

A life insurance policy generally allows you to request a full or partial surrender. Service Public notes that the insurer must normally pay out the funds within a maximum of two months after the request is made.

However, this flexibility does not mean that the underlying private equity fund becomes liquid. The portfolio companies are not traded on a daily basis, and their valuations are determined periodically.

The contract documentation may specify special terms for certain investment vehicles. The value determined at redemption may depend on the valuation schedule, the fund’s liquidity mechanisms, and the contractual provisions.

The possibility of redemption must therefore be verified in the contract prospectus and in the key information document. It should not be equated with the daily liquidity of a listed fund.

Fees that can add up

A private equity investment within a life insurance policy may involve several types of fees. The policy may charge contribution fees, annual management fees, and, in some cases, arbitrage fees.

The underlying asset itself incurs management fees. A performance fee, or carried interest, may also be charged when certain conditions are met.

In the case of a feeder fund or a fund of funds, an additional layer of fees may apply. Therefore, the comparison should focus on the total cost, not just the fees listed by the insurer.

A selection limited by the contract

Not all contracts offer the same investment units. Some provide access to a single private equity fund, while others cover multiple managers, strategies, or geographic regions.

The investor’s choice therefore depends on the insurer’s distribution policy. This selection process may make it easier to access the products, but it limits the range of options available compared to a direct purchase.

It is also important to verify whether the fund is still accepting new contributions, whether transfers are permitted, and whether any allocation limits apply.

Life Insurance or Direct Investment?

Both solutions provide exposure to the unlisted market, but they do not exactly meet the same needs.

Life insurance may be a good fit for an investor looking for simplified management, a dedicated investment pool, and a potentially lower minimum investment amount.

Direct subscription can offer a broader range of investment options and a more direct financial relationship with the fund, but at the cost of more complex management and generally a longer lock-up period.

The decision should not be based solely on tax considerations. The quality of the fund, fees, redemption terms, and asset allocation remain key factors.

What changes does the Green Industry Act bring?

The Green Industry Act of October 23, 2023, strengthened the role of unlisted assets in long-term savings. In particular, the decree of July 5, 2024, expanded the range of assets eligible for life insurance and facilitated the inclusion of certain ELTIF funds.

As of October 24, 2024, balanced managed investment profiles must include a minimum of 4% in unlisted assets. This proportion rises to 8% for dynamic profiles. Conservative profiles and discretionary management are not subject to these thresholds.

These percentages do not mean that every investor must personally allocate 4% or 8% of their assets to private equity. They refer to the allocations specified in certain managed investment profiles.

Furthermore, the regulatory framework continues to evolve. The decree of April 30, 2026, tightened the eligibility requirements for certain vehicles in life insurance and the “ PER.” This development underscores the need to verify the eligibility and documentation of each investment vehicle at the time of investment.

How do you choose your plan and device?

The first criterion is the quality of the private equity firm. It is important to evaluate the team’s experience, stability, strategy, net performance over several years, and ability to create value in the companies it supports.

IRR should not be used on its own. It should be considered in conjunction with TVPI, which measures the total value of the portfolio, and the DPI, which represents the amounts actually distributed.

The second criterion is diversification. A fund exposed to dozens of companies, regions, and sectors does not have the same profile as one concentrated on just a few holdings.

The third criterion is total cost. The costs of the contract, support, and the underlying vehicles must be added together. A comparison based on a single cost level would be incomplete.

The fourth criterion is contractual liquidity. It is important to review the valuation frequency, redemption rules, any penalties, allocation limits, and arbitrage conditions.

Finally, the allocation must remain consistent with the investor’s objectives, investment horizon, and liquidity needs. Private equity is a potential component of a diversified portfolio, not a substitute for disposable savings.

Key Takeaways

• In 2024, life insurance accounted for 76% of private equity fundraising from retail investors, according to France Invest.
• Private equity is generally available in life insurance through unit-linked policies, the value of which is not guaranteed.
• Life insurance can lower the initial investment, simplify management, and provide a specific tax and estate planning framework.
• After eight years, gains included in redemptions are subject to an annual tax deduction of 4,600 euros for a single person and 9,200 euros for a married couple filing a joint tax return. This is not a general exemption.
• The ability to request a redemption does not make the underlying fund liquid. The terms of the contract and the investment vehicle must be reviewed.
• Fees may accumulate across life insurance, unit-linked policies, and underlying funds.
• Since October 2024, certain managed investment portfolios have included a minimum allocation of 4% or 8% in unlisted assets.
• Fund manager selection, diversification, and a consistent asset allocation remain key factors.

FAQ

Can you invest in private equity through a life insurance policy?

Yes. Some multi-asset policies offer unit-linked options invested in private equity funds. The specific offerings vary by insurer and policy.

Is the principal guaranteed?

No. Unit-linked policies exposed to private equity carry the risk of partial or total loss of principal. The insurer guarantees the number of units, but not their value.

Does private equity become liquid in a life insurance policy?

Life insurance policies generally allow you to request a surrender of the policy. However, the underlying fund remains illiquid, and its value is not necessarily calculated daily. The exact terms are set forth in the policy documentation.

What tax rules apply?

Tax rules for life insurance apply when policy proceeds are withdrawn. Only the portion of the withdrawal that represents gains is taxable. After eight years, an annual tax deduction applies, but the gains are not automatically exempt.

What fees should you check?

You should consider the initial charges, annual contract fees, arbitrage fees, fund fees, and any performance fees. A fund of funds may add another layer of costs.

What is the minimum bet?

It varies depending on the policy and the unit of account. Life insurance often provides access to private equity with a lower investment amount than is required when investing directly in a professional fund.

Life Insurance or Direct Purchase: Which Option Should You Choose?

Life insurance generally offers simpler management and a specific tax and estate planning framework. Purchasing a policy directly can provide access to a wider range of funds. The choice depends on your goals, fees, investment horizon, and liquidity needs.

Does the Green Industry Act require investment in private equity?

It stipulates a minimum allocation to unlisted assets in certain managed investment profiles: 4% for balanced profiles and 8% for dynamic profiles. Discretionary management and conservative profiles are not subject to these thresholds.