Credit Suisse Lay Offs Add to Pessimism

As evidenced by the 13% decline in the Amrita Life Settlement Index’s February results, the life settlement industry still maintains a precarious posture. While a number of life settlement industry insiders have gone on record saying there will be a recovery in 2010, most agree it isn’t here yet. We’ve seen the industry recently shudder with the news of Goldman Sachs’ departure from life settlements.

Last month Credit Suisse added to the pessimism when it announced the lay off of seven employees and the reassignment of another 10 people from its Life Finance Group in New York. While the elimination of 17 jobs from an enormous multinational financial institution may not seem significant, reverberations will certainly be felt in the industry. Many outsiders do not realize that life settlement operations are very small compared with others in the financial services’ sector. Most life settlement providers and life settlement brokers operate with just a handful of people on staff. Credit Suisse as a major player in the life settlement industry reported on its website that its life finance department had over 90 employees. An almost 19% downsizing of that department, on the heels of Goldman Sachs’ exit, has certainly made some nervous about the secondary life insurance market.

Even with investment banks playing a smaller role, all is not lost with the life settlement industry however. A recent trade mission to Europe attracted much interest from new European investors and institutions. Trade mission committee chairman, Brian Casey also expressed some optimism. The Life Settlement Source reported Mr. Casey who is a partner at Locke Lord Bissell & Liddell and one of the leading legal experts in the life settlement industry, as saying “Pension funds, are trying to “crack the nut” with some interest from state and labor union pension funds. And a couple of private equity firms have expressed an interest to receive basic information about the life settlement market”.

While some new participants are poised to enter the secondary life insurance market, their impact may not be felt immediately. Purchasing life settlement investments requires more robust operational requirements and intense due diligence beyond buying other asset classes. So the recovery may well be on the horizon, but the new players are just now dipping their toes in the water.

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