6 Predictions of Life Settlemen Secondary Market

Here 6 predictions of the grown life settlement market:

1.

Life settlements fund managers predict this sector will grow in volume to USD150bn or more in 4 to 8 years

therefore growing at about 20% to 30% per year. This is a huge swell in the life settlement industry.

2.

Managers of various life settlement investment funds , are predicting that the US traded life settlement market will grow in value to USD150bn by 2018 and other sources say that volume may be a reality in 4 to 5 years let’s say by 2012. The volume is being driven by the demand from institutional and individual accredited investors seeking stable returns in an unstable market.

3.

Firms, which have life settlement assets under management, expect very significant growth because other asset classes have become increasingly volatile. So registered investment advisers be on the look out.

4.

Since the market's emergence from the viatical industry of the 1990s, the life settlement industry has grown dramatically. With increasing nervousness surrounding traditional asset classes, tighter regulation and a more structured approach to investing, the life settlement product is of a much greater interest to pensions, institutional funds, bank investment funds, and high net worth accredited investors.

5.

To summarize a life settlement, it is a life insurance policy sold on the secondary market, where the insured party can expect to receive more than the surrender value of the insurance policy but less than the death benefit. The buyer acquires the beneficial interest in the policy and is now responsible for making the premium payments. The buyer or investor will receive the death benefit when the insured individual expires. Typically you can expect the returns to range between 8 and 12 per cent.

6.

The policies traded are generally those taken out by people who are retired. On the sale of the policy their life expectancy is assessed by a medical underwriter. Ascertaining the life expectancy of people aged 65 or more is challenging and special care is taken to evaluate the life expectancy and the latest Valuation Basic Mortality Table is used to estimate the life expectancy. The presence of a medical condition needs to be identified and the degree of severity compared with the base line levels in order to complete the analysis.

How The Life Settlement Secondary Market was Created

Take a look what wikipedia state about the history of the secondary market :

Although the secondary market for life insurance is relatively new, the market was more than 100 years in the making. The life settlement market would not have originated without a number of events, judicial rulings, and key individuals.

The Policy as Transferable Property

The Supreme Court case of Grigsby v. Russell (1911) established the policyowner’s right to transfer an insurance policy. Justice Oliver Wendell Holmes noted in his opinion that life insurance possessed all the ordinary characteristics of property, and therefore represented an asset that a policyowner could transfer without limitation. Wrote Holmes, “Life insurance has become in our days one of the best recognized forms of investment and self-compelled saving.” This opinion placed the ownership rights in a life insurance policy on the same legal footing as more traditional investment property such as stocks and bonds. As with these other types of property, a life insurance policy could be transferred to another person at the discretion of the policyowner.

This decision established a life insurance policy as transferable property that contains specific legal rights, including the right to:

• Name the policy beneficiary
• Change the beneficiary designation (unless subject to restrictions)
• Assign the policy as collateral for a loan
• Borrow against the policy
• Sell the policy to another party

A second milestone occurred in 2001 when The National Association of Insurance Commissioners (NAIC) took a crucial step by releasing the Viatical Settlements Model Act defining guidelines for avoiding fraud and ensuring sound business practices. Around this time, many of the life settlement providers that are prominent today began purchasing policies for their investment portfolio using institutional capital. The arrival of well-funded corporate entities transformed the settlement concept into a regulated wealth management tool for high-net-worth policyowners who no longer needed a given policy. Strong demand for life settlements policies is driving a rapid market expansion that continues today.

The year where this market started to take action was 1980 when the AIDS crisis began to expand in a scary rate, which cause an immediately necessary to those that owned a life insurance policy a fast way to get funds for special medical treatment to them or relatives that were infected with this fatal decease. Since then a complete secondary market has been operating for the purpose of buy/sell of life insurance policies.