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23 October 2012

Increased Life Settlement supply in the US will benefit Life Settlement Investors in coming years

Policies entering the secondary market could be up by up to 40% in the next few years with potential enhancements to investment returns as a result.

SL Investment Management (SL), one of the largest life settlements investment managers in Europe, is predicting a market increase similar to that seen by the TEP industry when UK life insurance providers were forced to inform consumers about the secondary market; SL predicts this will happen in life settlements following adoption of similar laws in the States. 

The US National Conference Of Insurance Legislators (NCOIL) adopted legislation requiring life assurance companies to provide alternatives to lapsing or surrendering a life policy and this model has now been implemented in a number of US States.

According to a survey by the US Government and Accountability Office, consumers who chose to sell their policy in the secondary market received seven times more on average than if they had chosen to sell the policy back to the insurer for the policy's cash surrender value.

Furthermore, a recent survey by industry commentators Dealflow, revealed that $5.04bn worth of life policies were traded in the secondary market in the US in 2011 - up 18.5% on 2010.

SL predicts the trend will continue if further states adopt the NCOIL model and this may drive a similar market increase in the US as was experienced in the UK when disclosure requirements lead to a 40% increase in secondary policies being brought to the UK secondary life policy market.

SL's Investment Director and ELSA Chair, Patrick McAdams, commented: "More policies entering the secondary market in the US is good news for investors. Life Settlement managers will have greater choice in terms of the quality and price of policies they wish to buy for their portfolios. This is continuing good news for the surge in interest from sophisticated investors that the asset class is enjoying at the moment."

Read more in the article 'US TEP market hots up' at the FT Adviser and the article 'Increased life settlement supply in US will benefit investors' in the Wealth Adviser.