The market is poised for a recovery, and along with it comes new life settlements opportunities, according to a recent study. Conning has released its annual report on Life Settlements with reviews on the market opportunities and investment challenges for this alternative asset class.
In its 2013 study, Conning recapped their 2012 report, stating that a healthy demand still exists but the market struggled to raise new capital in 2012. Although renewed interest surfaced in 2013, Berkshire Hathaway confirmed a purchase of a life settlement portfolio with $300 million in face value.
Without going into too much detail, you’ll have to read the nitty gritty details yourself, Conning estimates that some capital will continue to flow however “liquidity continues to be a hindrance to a strong capital return to life settlements,”1. The demand for long term care (LTC) funding solutions may prove to be a new life settlements opportunity for investors. This may see an increase in capital for the life settlements market. Investors need to be aware however that this poses a different set of challenges then your traditional life settlements investment.
Conning has also outlined positive growth factors for the industry:
- There is a strong demand for life settlements transactions with policy holders seeking a competitive alternative to lapsing or surrendering policies.
- There will be ongoing demand from alternative asset investors seeing low correlation to the equity and debt markets.
- Standardisation of life expectancy methodologies and improvements to policy pricing should increase investor confidence
- With continued regulatory progress in the asset class by the SEC (Securities and Exchange Commission) and European regulators will strengthen investor protection.
As always we wish you well in your endeavours in this interesting and valuable asset.
Please feel free to contact us if you have further questions.
[1] Conning, 2013, “Life Settlements – A New Opportunity in Smaller Policies”, pp11
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