A life settlements industry paper by S.Rosenfeld, published by Wharton Financial Institution Centre, delivers an understanding of the life settlements market.
Brief Abstract: “The paper offers an explanation for the evolution and increasing maturity of the life settlement market and the implications for all longevity based financial instruments and products by exploring the market dynamics and asset valuation processes. The paper begins by revisiting the brief history of the life settlement market before examining the market’s evolution, finding that the increased participation in this multi-stage market has driven innovation, leading to the commoditization of various services and products which forces present service providers to either withdraw or adopt one of the operational marketing models, and lowers the barriers to entry for revolutionary service and product development. The paper then examines the value that the life settlement asset provides to both parties and establishes how that value is assessed. The paper finds that for impaired lives and specific other policies the settlement value is significantly greater than the surrender value, and that the calculation of worth to both buyer and seller must calculate both financial value and utilization value; the seller gains utilization from releasing liquidity, the buyer from portfolio diversification in an asset class whose underlying is at most weakly correlated to equities, bonds, real estate and commodities. The paper examines the value, considerations and risks for institutions considering investment in life settlements and other longevity based financial instruments. The paper finds that there are individual and market benefits from the asset class, that the asset class also creates macroeconomic benefits, and that it is simply a matter of time before life based financial instruments join equities, bonds, real estate and commodities as a staple of portfolio diversification.” 1
 S.Rosenfeld, 2009, Life Settlements: Signposts to a Principal Asset Class, pp1
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