Acquiring Life Insurance Portfolios

Abstract

Though the secondary market for life insurance policies has only recently developed, institutional investors and others involved in the life settlement industry are witnessing early signs of a tertiary market for whole portfolios of life insurance policies that have been formed over the past several years through multiple life settlement transactions. For institutional investors that are seeking either new investment opportunities or to diversify their existing investment portfolios, a tertiary market for portfolios of life insurance policies may present new investment opportunities and a means to minimize risk in a new class of investment assets. This article explains certain risks associated with the purchase of life insurance portfolios such as contestability risk and uncertain availability and quality of information on individual policies. The authors explain how life settlement providers can be helpful in the securitization of life settlement portfolios. They anticipate significant growth over the next several years in the tertiary market for life insurance portfolios.