Our Funds acquire interests in life Policy investments via Life Settlements. A “Life Settlement” is the transfer of the beneficial interest in a USA life insurance policy, by the insured person to a third party (in this case, the Fund). The policy owner transfers their policy at a discount to its Face Value, in return for an immediate cash settlement. The purchaser of the policy is then responsible for premiums payable on the policy and will be entitled to receive the full Face Value from the insurance company upon maturity (death of the insured).
Why are Life Settlements a Unique Investment?
The returns from Life Policy investments (through Life Settlements) are generally not correlated with other investment markets for a variety of reasons. Once a policy has been purchased the benefit payable is known. This means that the performance of the Life Policies will be based on the characteristics of the pool of the insured lives, and not on the performance of traditional markets, such as the stock market, the property market and the interest rate market. The Investment Manager considers that the size of the U.S. Life Settlements market, combined with the U.S. regulatory controls and other features, make Life Settlements an attractive investment. Yield is determined by time not market forces, so it’s not a question of ‘if’ a return will be paid, but ‘when’ it will be paid.
History of Life Settlements
The Life Settlements industry emerged in 1997 as a secondary market for life insurance policies issued by insurance companies in the USA.
Why do people sell their life insurance policies?
Most people acquire life insurance early in their careers as a means of protecting their income and family in the event of an unexpected event. However, over time, changes in people’s circumstances often mean that individuals want access to the value “locked-in” their life insurance policy prior to their death. In the USA people are becoming increasingly aware that their life insurance policy may qualify for a Life Settlement. These changing circumstances could include the following:
- The insured may have outlived the beneficiaries the policy was originally intended to protect.
- Premiums may have become unaffordable and unless sold as a Life Settlement, the insured may have to let the policy lapse.
- The insured may be financially secure and have no further need for the policy.
- The insured may wish to make a gift of the monetary value of the policy while they are still alive.
- The insured may sell the policy for estate planning purposes.
- The insured is considering whether or not to lapse or surrender the policy, for its cash surrender value.
In circumstances where the alternative for the insured is to let the policy lapse and lose a potentially large portion of the premiums which have been paid on the policy, a Life Settlement is an attractive option.
Want to know more about life settlements?
This website is filled with a variety of technical and useful information on the life settlements industry.
We have included several industry studies published about life settlements on our website to assist you in further understanding this asset class. Join in on discussions and analysis in Commentaries and Studies or Blog Page.
For additional information, please contact the Investment manager at +61 7 5557 4700 or alternatively please use the contact form.