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[Q] Can EB-5 investor get insurance from a third party for his investment into a new commercial enterprise?


[Q] Can an EB-5 investor use funds unrelated to the EB-5 investment to purchase insurance from a third party (e.g., Lloyd’s of London) in which insurance proceeds would be paid to the investor if the commercial enterprise fails to repay the investor? Assume the third party is unrelated to the commercial enterprise or a regional center.

Let me quote USCIS' answer to this particular question in its entirety, because this issue opens up interesting stuff.

Yes, as long as the alien investor’s capital is “at risk”, and the indemnity policy does not constitute a redemption agreement or a guaranteed buy-back arrangement for the alien investor’s investment in the commercial enterprise. A determination as to whether a specific indemnity policy is contrary to the statutory and regulatory requirements has to be made on a case-by-case basis.

USCIS, to make sure that EB-5 investors do not rush into buying insurance (assuming they can get an insurance for this kind of thing), states that a "case-by-case basis" determination will be made. This kind of language usually means: "It's legally possible but we don't think it's a good idea."

We would not be surprised to see this arrangement being attempted in near future.