How, in theory, Sidecars Insurance is able to pay a $500,000 claim after an EB-5 investor pays $35,000 in premiums
Continued from the third article in our 4-part series about an EB-5 reimbursement insurance program:
The insurance arrangement Tharp describes ? the one involving outside investors ? is an uncommon one, but not unheard of in the industry. Companies will sometimes set up a vehicle into which they place funds from investors with no underwriting experience. In exchange, investors receive a percentage of the insurance premiums. Enough funds must be put up to ensure the payment of claims. The fewer claims that are actually paid, the more money investors stand to make.
The entity into which investors put up funds is known as a "reinsurance sidecar." Hence, Sidecars Insurance Company.
But the use of life settlement policies to pay claims is somewhat unconventional for a reinsurance sidecar. Whether investors opt for the life settlement "option" or not, the Idaho State Regional Center makes a point of disassociating itself from the Sidecars Insurance policy ? publicly, at least. Legally, the purchase of such a policy must come from a completely "unrelated" commercial enterprise.
"The regional center merely informs investors that such a policy may be available," explained Jason Blatt, maintaining that the regional center has no connection to the insurer. "Whether [investors] buy the insurance is up to them, and is a matter between each individual investor and an insurer," he said.
So even the Idaho State Regional Center cannot actually recommend the Project Performance Investment Reimbursement policy ? even though it's the only regional center whose investors Sidecars is willing to insure.
Like many issues in EB-5 visa law, reimbursement insurance for investors is a thorny one. With little precedent for the permissibility of a Sidecars-like policy, it is hard to acknowledge purchasing one as being in the best interest of the investor.
And it is hard to acknowledge life settlements from Life Partners as being in the best interest of anybody.