Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Life Settlements Market Ideal for Re-Expansion

Posted by William Byrnes on October 21, 2010


Why is this Topic Important to Wealth Managers?  Discusses the general market conditions of life settlements.  Also provides reasons why some policy holders may consider selling their interests.   

As discussed earlier this week, a traditional life-settlement transaction consists of an third party purchasing an unknown individual’s life insurance policy for consideration.  The purchaser continues to pay the premiums until a death benefit is collected, the contract is sold to another individual or business, or is surrendered. 

The Wall Street Journal attributes the creation of the industry “back to the 1980s, when [terminally ill] patients sold their policies to raise cash for medical treatments.”   The Journal also notes, the “market boomed earlier this decade, as hedge funds eager for offbeat alternative investments piled in.”  

Since the decline in overall macroeconomic market conditions, “the total face value of policies purchased in the secondary market fell to $7 billion in 2009 from $13 billion in 2008”.  “Prices for policies, meanwhile, fell to an average of 13% of the death benefit in 2009 from 21% in 2006.”   Nevertheless, industry experts are expecting a rise again in total market figures by the end of 2010.  It is not surprising given the SEC’s new enforcement efforts discussed below. 

For the remainder of the article see AdvisorFYI.

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