In a life settlement transaction, there is a chain leading from
the seller of the policy to the end buyer of the policy (known
as a
life settlement provider.) Each link in the chain
has a different responsibility in facilitating the transaction
and ensuring that it runs smoothly, while outside vendors
typically assist the provider with specialized functions.
Policy
Sellers
Candidates for life settlements are policy owners over the
age of 65 who no longer want or need a particular life insurance
policy. Life settlement candidates generally have a life
expectancy between 2 and 20 years. There are certain
restrictions for their policies as well - policies must be
valued at $100,000 or more, and depending on the life expectancy
determination of the seller, any and all types of policies can
be sold, ie; universal life, whole life, or convertible term
contracts.
Investors / Risk takers
While the Life Settlements industry may appear to be good
value to investors that are novices in insurance accounting
these investments, in fact, typically represent extremely poor
value for a number of reasons. Despite the industry being a
number of years old there are absolutely no statistics available
on how these investments have actually performed. This is
because they are suppressed by Life Settlements originators whom
are the only business participants of this marketplace to
historically have made a profit. Those statistics that are
available are usually miscalculated and devoid of meaning. In
the 6 year history of the industry there has not been one risk
taker that has profited from a buy and hold strategy. This stems
primarily from the fact that most participants rely on extremely
poor actuarial and medical underwriting consultancies whom
grossly overestimate the value of Life Settlement policies.
These overestimates are the result of misaligned interests, and
incompetence.
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