Policy Buyers Up Their Game

The insured in this case involved a life-licensed CFP who owned a $2.8 million term policy nearing expiration.

As a registered advisor whose practice included senior clients, he was mindful of his fiduciary responsibility to inform older clients of the life settlement option when it was in their best interests.

Given the situation with his own policy, the advisor recognized an opportunity to boost his fiduciary competence through the learning experience of selling his own policy.

In spite of his young age of 65, we were able to negotiate several competitive offers from buyers that resulted in a $30,000 cash windfall for his term policy, and a broker’s commission of $60,000 for the term-conversion to a UL policy.

In short, policy sellers stand to benefit from increased investor interest in the life settlement market that enables buyers to extend more attractive offers on a broader range of policies, including policies for younger insured seniors.

Not only does the seller receive a cash pay-out far beyond the policy’s cash surrender, but they effectively shift an unwanted expense to the income column.

And in the case of term policies that are about to expire, it’s clearly a cash windfall.

Licensed agents and financial advisors who represent the client do the heavy lifting as it relates to case preparation and working with the life settlement broker to facilitate the sale.

In return, they may earn broker’s compensation on the life settlement transaction as well as a sales commission on the UL term-conversion.

Who are the investors in the Life Settlement Market?

Over the past 30 years, the secondary market for life insurance has evolved into a mature, well-regulated asset class.

In the early stages of the market, institutional investors included Goldman Sachs, Credit Suisse, and Deutsche Bank.

At that time, only a handful of states regulated the market.

Today, some of the world’s most prominent institutional investors are participating in the secondary market for life insurance comprised of hedge funds, pension plans, banks, insurance companies, endowments and top-tier investors such as Blackstone, Apollo, KKR, Carlisle, Ress Capital and others.

In terms of the regulatory landscape and market maturity, 43 states and the territory of Puerto Rico now regulate life settlements.

By all indications, the market’s future looks promising with double-digit growth expected.

A recent report by Conning Research predicts that by 2028, “the life settlement market will have seen an impressive $212 billion of life settlements.”

Take Away

With more aggressive sources of capital entering the life settlement space, now may be the time for financial and insurance professionals to discuss life settlements with their older clients.

In addition to optimizing the cash liquidity of a dormant asset, clients who qualify for a life settlement will eliminate an unwanted premium expense while receiving a cash windfall to help boost their retirement assets.

Jeff Hallman and Scott Thomas are co-founders and managing partners at Asset Life Settlements, a life settlement brokerage company based in Orlando, Florida. Hallman can be reached at (888) 335-4769, extension 1108, and Thomas can be reached at (888) 335-4769, extension 1115.