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Recent Updates in Life Settlement Market
As life settlement brokers, with our fingers on the pulse of the life settlement market, we are constantly asked what trends we seeing happening. Is the market getting stronger? Are offers getting better? Is it a good time to sell a life insurance policy on the secondary market. This is a brief update on some of the trends we are seeing out in the marketplace.
1) New buyers are coming to the table. We see a lot of interest from retail investors looking to get into the space and asking how they can best do that. We spend a lot of time educating life settlement investors about various options for life settlement investments and then referring them to the appropriate 3rd parties that work with life settlement investors. These could include fractional life settlement companies, life settlement investment funds or even life settlement providers that work directly with buyers.
2) Aside from retail buyers, we are seeing new capital in the marketplace. Both from established sources that have new money and new players. This certainly bodes well for those trying to sell their life insurance policies as it offers new capital, more competition among buyers and ultimately better offers. However, the life expectancies coming in with cases are still a challenge. With the relatively new life expectancy tables from LE Providers we are seeing long LE's get in the way of deals or pricing policies well.
3) We are seeing policies of all shapes and sizes. Life settlements, once the domain, solely of the high net worth policy owners and their large policies, are now getting interest from those with small face policies as well. We see loads and loads of small face policies (<$500k). We can work with policies down to $100k, but below that don't have a market. Unfortunately, we get many requests from folks with policies in the sub $100k range that just don't have market.
4) We are seeing a number of players focused on short LE policies and viaticals. Obviously, these are safer investments because the life expectancy with advanced, terminal illness is more predictable than say someone who's 10 year+ LE is based on age alone. However, due to a lot investment fund prospectuses the insureds must still be at least 65 years old. For those less than 65 years old, we do have smaller niche buyers.
5) Expectations - We get many calls for individuals that want to sell their policies but have very unrealistic expectations. For example, we recently got a call from someone that wouldn't consider selling their $1.2mm policy unless we could assure them that they would get at least $800,000 to $900,000. This is highly unrealistic. Not only do the numbers have to make sense for the buyer, but the seller must understand that their are market forces at work too. A policy is only worth as much as a willing buyer is agreeable to paying a willing seller. When those two parties don't have some common ground there is no market. Unfortunately, many sellers have unrealistic expectations and that prevents them from being able to sell a policy. We always try to provide sellers with a reasonable expectation of what a policy is worth and what the market will most likeley bare.
6) We've seen a lot less interest from insurance agents in terms of participating in life settlement transactions. Perhaps the lack of easy money that was previously available or narrower buying boxes discourages them? Nonetheless, we don't see as many insurance agents looking for life settlement opportunities as before, which is unfortunate since that means their clients aren't aware of the option.