Life Settlements

Abstract

There is little doubt that the life settlement industry has taken a quantum leap forward over the past six years, and a variety of indicators point to the fact that the industry is poised for remarkable growth over the next few years. Public awareness and acceptance of the product has gained traction as thousands of seniors turn to the secondary market each year to maximize the value of their unwanted life insurance policies. In addition to the fact that institutional investors are fueling the product's growth, most insiders agree that the marketplace is being propelled by a financially sophisticated, aging population, as they discover that an economically sensible exit strategy from unwanted life insurance policies does indeed exist. Although thousands of life settlement transactions are being sourced through agents, brokers, and providers, much of the market potential remains untapped due to product-flow constraints. Furthermore, approximately 80% of the policies presented to funders never make it to the cash register for various reasons. This article presents a general overview of the life settlement market, examines the dynamics and players involved in product flow, and identifies the main drivers and constraints in sourcing policies at the point of sale.

TOPICS: Other real assets, portfolio construction, exchanges/markets/clearinghouses