* Possible bidder said contacted by Swiss Life about U.S. book
* Certain insurance products under FATCA spotlight
ZURICH, March 28 (Reuters) - Insurer Swiss Life is looking to sell a specialist unit catering for U.S. clients and is sounding out possible bidders, a company approached about a deal said.
The unit specialises in a form of life insurance that has a cash value based on its investments and which is used because clients can pick and choose what investments they are in.
But such policies, known as private placement life insurance (PPLI), have become a worry for some insurers, as policies for U.S. clients will be subject to the U.S. Foreign Account Tax Compliance Act, or FATCA, an anti-tax dodging law being rolled out around the world via inter-governmental agreements.
Insurer Crown Global said it had been approached about the Swiss Life unit.
"We were asked if we were interested in exploring Swiss Life's U.S. book," Crown Global director Perry Lerner said, adding the firm was first approached by an intermediary and was now in direct contact with the insurer.
Fellow Crown Global director Chris Calise said discussions were still at a preliminary stage and the firm had not yet seen Swiss Life's U.S. book.
Two Zurich-based industry sources said Swiss Life had been considering its options for the business for several months. Swiss Life declined comment on the matter.
The industry sources said the business had assets under management of between $1 billion and $2 billion and contributed a relatively small part of Swiss Life's overall premium income.
Personal insurance specialist Crown Global, which has offices in Zurich, Cayman, Bermuda and Delaware, could double in size if it buys the unit.
Swiss regulator FINMA said it had underlined the risks associated with insurance products including PPLI, particularly under FATCA, which the United States and Switzerland signed in February.
"These issues and any consequences for insurance company clients are part of our ongoing supervision and will certainly be discussed further in view of the imminent introduction of FATCA," said FINMA spokesman Tobias Lux.
One of the industry sources said the FATCA rollout could be a looming headache for some Swiss insurers.
"A lot of the policies do not meet criteria for life insurance under U.S. law, so could be subject to heavy tax liabilities," the source said, adding that companies were worried policies could have been funded with undeclared money.
The source said most of the employees who had built Swiss Life's U.S. book had long since left the insurer, while others were worried about personal liability.
Several Swiss bank employees have been arrested or indicted in the United States during a long-running tax dispute, and the industry source said Swiss insurers who had served U.S. clients were worried they could face the same fate.