Life Settlements
Life Settlement Sector Predicted to Grow to 160 Billion
Policy Selection, manager of the Assured Fund life settlement investment product, predicts that the US life settlement market will grow substantially in the next 8 years. The current turbulent market will boost the sale of life insurance policies as institutional and retail funds seek stable returns, causing it to grow to 160 billion dollars by 2016.
Policy Selection was established in 2003 and specializes in the U.S. senior life settlement market. Currently holding 379 million dollars in assets, the firm expects ‘very significant growth’ in the market as the general U.S. market becomes more unstable.
According to Policy Selection finance director Andrew Walters, ‘there is around 10 trillion dollars of life insurance in the U.S. market,’ making it the ‘biggest in the world.’ He states that since the market’s development in the 1990s, it has grown substantially.
Walters states that the ‘increasing nervousness surrounding traditional asset classes, backed by tighter regulation and more specific approach to investing in these polices, we believe major pensions, institutional and big bank investment funds will see low-risk life settlement funds such as Assured as a natural fit delivering definable returns.’
Traded life settlements are life insurance policies that are sold, allowing the policy holder to receive more than the surrender value of the policy, but less than the actual death benefit. The buyer of the life policy then becomes the beneficiary of the policy and is responsible for making all premium payments due.
When the policy is sold, the original policy holder’s life expectancy is assessed based on previous medical history and their lifestyle rating score, known as a mortality loading. The individual’s score is then compared to 1,000 other lives with similar scores.
Policy Selection claims that life settlements are not correlated to traditional markets since the return is definable and is not dependant on consumer buying, which will undoubtedly be greatly restricted due to the credit crunch.
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