Life insurance companies based in Bermuda can offer high net worth individuals personalised life insurance and annuity products at a lower cost than those available in the US, an insurance conference has been told.

Speaking at the International Life and Annuities Forum at the Fairmont Southampton Princess earlier this week Jack Murphy, a partner in Dechert Price & Rhoads of Washington, DC, said: "In general, offshore jurisdictions place very few restrictions on the type of investments that may be included within an offshore variable insurance product.

"As a result, offshore insurance companies can benefit from the ability to issue contracts that may be specifically designed, subject to certain tax issues, for high net worth individuals seeking alternative insurance products that will accommodate a personalised, diverse investment selection at costs that may be at substantial savings compared to those available in the US.

"Even though these products are negotiated and sold outside of the US, such offshore variable insurance products must be designed and distributed with regard to US federal securities and futures laws.''

Donald Cameron, executive vice president of MRM Life in Bermuda, told delegates that the company is not allowed to directly solicit business outside of Bermuda. However citizens or residents of any country are authorised to purchase a policy through an intermediary under certain rules.

Mr. Cameron said all solicitations and deliveries of life products must take place in Bermuda and the products can be bought for those outside Bermuda by duly constituted trusts or by a personal representative of the purchaser with a power of attorney.

"The application for the policy must be delivered to MRM Life at its home office in Bermuda and the policy must be physically delivered in Bermuda to the policy owner or his/her duly authorised attorney-in-fact.''

He said MRM's products cannot be distributed through life insurance agents or brokers outside Bermuda and the company cannot indulge in cold calling or advertising. However the company may meet with financial advisers or conduct educational seminars on the advantages of life products in meeting financial planning objectives.

Mr. Cameron told delegates that the sales and solicitation process is the most misunderstood of all aspects of offshore life products and he warned that carriers who violate the rules can be subject to serious and lengthy litigations, either with the US authorities or the client and their beneficiaries.

"The solicitation process can be smooth if the effort is made to monitor and enforce your company rules,'' he said.

Brian Casey, partner in charge at Morris, Manning & Martin of Atlanta, explained how careful an offshore company has to be when entering into a life product transaction with a US citizen. He suggested no documents should be delivered that carry the offshore company's name and any meetings should be with the advisors of the prospective insured rather than with the prospective insured.

He said the letter of engagement should be signed in a state other than the prospective insured's state and the same applies for the medical examination. The insurance application must be signed outside the US and the policy must be delivered outside the US. The premiums should go from the insured to an offshore purchasing entity's account and then on to the offshore insurer, and there should be no agency agreement between the offshore insurer and the intermediary representing the offshore purchasing entity.