A Challenging Year in the Life Settlement Industry

Abstract

The life settlement industry has not been immune to the effects of the financial crisis that has gripped the world in the last 12 months. Combined with shifting life expectancies and continuously developing legislation, the life settlement industry has had its share of challenges. New judicial decisions, however, have helped address certain issues relating to insurable interest, such as whether the intent of the insured is relevant in the analysis, which was a question raised in the widely publicized “Life Product Clearing”case. Furthermore, revenue rulings recently released by the IRS provided additional certainty with respect to the characterization of income in life settlement transactions. Although the economic environment continues to be challenging, as economies begin to recover and investors begin to invest their capital again, the uncorrelated nature of life settlements should continue to make them an attractive alternative asset class.

TOPICS: Financial crises and financial market history, legal and regulatory issues for structured finance