May 29, 2018
Controversial: Bet on Death – US Life Settlements Considered One of the Most Polarizing Asset Classes in the Market
US Life Settlements is one of the most polarizing asset classes. However, the US Life Settlement market has become much more professional and transparent over time.
In the past – the possibility of investing in US Life Settlements has existed in Germany since 2002 – there were some misjudgments in this market, such as incorrect assessments of longevity risk, which led to financial losses for investors. Ethical concerns still make it difficult to offer this asset class to German investors today. US life policyholders have good reasons to sell their lifelong policies at a certain age and are glad to do so profitably.
Attractive Asset: US Life Settlements
It is an attractive business not only for policy sellers, but also for investors. The investor can hold the policies until the death of the insured and have the death benefit paid out or sell the policies in advance in the tertiary market. In order to estimate the time of the insured event as accurately as possible, the life expectancy of the insured person must be estimated statistically.
Core Issue Longevity Risk
The success of an investment in US Life Settlements depends largely on the life expectancy report prepared by a medical underwriter. In contrast to previous years, legal regulation in most US states has led to a higher standard. Market price information has become more transparent, and industry standards have been set through the participation of international associations.
Financing of US Life Settlements
When extending loans, US life insurance policies from insurance companies with strong credit ratings and investment grade are preferred. In addition to weighting the life expectancy reports and checking the legal validity of the policies, there are many factors to consider.
Please read the complete guest article by Stefan Rensinghoff, Managing Director of North Channel Bank, in the professional magazine Versicherungswirtschaft.
Download Article, Versicherungswirtschaft No. 05/2018 (PDF) in German Only
(With the kind approval of the respective copyright owner)