The science around medical underwriting continues to evolve in the dynamic environment of human longevity while the discussion around appropriate methodologies for uniform financial analysis is timely given the post GFC environment where lack of suitable robust analysis was the root of many a financial failure.

The application of correct policy data in any calculation is of paramount importance in the life settlement asset class. Unlike a bond or stock price analysis the information for input into the analysis calculation is not uniform or generic. In fact every new life policy you pick up to analyse will potentially have features and data idiosyncratic to that case alone even when potentially comparing separate policies on the same insured life and issued by the same insurance company.

Accordingly an investor (or Manager) should be careful to assess purchases on each policy’s individual merits and not on a generic portfolio basis.  Many a Hedge Fund has acquired portfolios at apparently bargain basement rates only to find that large sections of the assets are worthless and that are IRR negative or will go so in a very short space of time.

You can have the finest underwriting and the best return analysis tools but unless you have the skills to select the best policies, for your life settlements portfolio, these will be wasted.

Here are seven reasons (and the list is not exhaustive) why the price you pay for one policy of identical Age, Gender, Smoking Status, Life Expectancy and Policy Type could be justifiably quite different to another.

1. Prices in the Secondary Market can differ from the Tertiary Market.

2. Policy Size

3. Policy Documentation and Wording

4. Premium Optimization Calculations

5. Policy Metrics

6. Carries Risks

7. Legal Risks


If you wish to learn the best process for purchasing and valuing techniques which may affect your gross return for life settlements investments, we will be more than happy to outline a best approach to suite your needs.

As always we wish you well with your life settlement investment opportunities and if you want to learn more about investing in this asset class please contact us.