October 15, 2018

Investment in US Life Settlements and the Ethics Issue

When investing in US Life Settlements, information about this special asset class is still important. This investment opportunity has been criticized by investors in Germany especially from the ethical point of view. Influenced by the widespread statement that it is the “deal with death”, German investors are very cautious. But they are only insufficiently informed, especially about the question of ethics in this business sector.

Secondary Market for US Life Settlements Provides Advantages for US Policyholders

Most investors do not consider why US Americans sell their risk policies. Usually these policies run for a lifetime and the policyholders can no longer afford to pay the premiums when they retire. The original insurance reason is no longer relevant because, for example, the house is paid off and the children have long been independent. The sales opportunity offers them a profitable way out – and has been doing it for over 100 years.

Regulated Market for US Life Settlements

Since the 1990s, a significant market has been established, which has now been regulated by law in most US states and has professionalized policy trading. Market pricing has become considerably more transparent.

Increasing Interest in Investments in US Life Settlements

International investors are increasingly interested in this “alternative investment” and use it as a diversification of portfolios. The special feature of this asset is that, in contrast to German endowment life insurance policies, the amount of the expiration or death benefit for US Life Settlements is fixed when the contract is concluded, while the occurrence of the insured event is unknown. When evaluating a policy, it is essential to assess the longevity risk correctly. So-called “medical underwriters” are specialists who provide expert opinions on the life expectancy of the insured person.

Financing of US Life Settlements

Financing of investments in US Life Settlements requires the support of experts. The financing institution should specialize in this asset class. North Channel Bank is one of the few institutions in the world to provide US Life Settlement financing. In addition, the bank offers investors the opportunity to participate in a loan portfolio with US Life Settlements.

For more information please read the complete guest article by Stefan Rensinghoff, Managing Director, North Channel Bank.
Download Article, RenditeWerk No. 05/2018 (PDF) in German Only
(With the kind approval of the respective copyright owner)