The Industry
The senior secondary life insurance business is still a young and rapidly developing market. The secondary market for life insurance policies first developed in the late 1980’s and early 1990’s as a response to the international HIV/AIDS epidemic. There were suddenly a substantial number of terminally ill policy holders needing liquidity to meet their healthcare and daily living expenses. In thousand of instances, life agents and trusted advisors helped their clients monetize their unwanted or unneeded life insurance for an immediate cash settlement payment. These initial “viatical” settlements provided proof of concept while helping to meet an urgent need for many terminal insureds.
A senior life settlement market (focused on non-terminal insureds), emerged nearly a decade later in the late 1990s. The agent, broker and provider infrastructure created to serve AIDS and terminally ill insureds began to create life insurance liquidity for a much larger population, senior insureds. Life settlements is an ongoing revolution to the static and well established life insurance market. The secondary life market is developing into a combination of both life markets and capital markets. The convergence of these markets creates a remarkable level of liquidity to insurance contracts.
This new secondary market has been a paradigm shift for estate and financial planning advisors, life agents and tax professionals as they realize that life insurance assets have a measurable economic value. Because of the liquidity available from a growing secondary marketplace the primary life insurance market has more value. Life insurance assets can now be moved from a footnote on an individual’s financial statement and recognized as an asset that can be valued and monetized.
In 2003, when Peninsula was founded, the number of funders, that is, institutional investors, in the marketplace was less than twenty. The universe of institutional funders now exceeds one hundred and includes insurance companies, commercial banks, investment banks, pension funds, mutual funds, hedge funds and closed-end funds from around the globe. Wall Street is often effective in predicting what investment products investors will demand and then creating innovative products to supply that demand. In this regard, the capital markets understood that pension funds, endowments and family offices would be very attracted to the non-correlation and low volatility afforded from investing in our asset class.
These banks and capital markets specialists have begun to structure and market a variety of sophisticated products using life settlements as the underlying asset. These products offer investors synthetic exposure to life settlements without the risks and responsibilities associated with direct ownership of a large life settlement portfolio. As the demand for this new generation of life insurance linked - structured products grows, so does the demand for the underlying life settlements needed to fill the portfolios on which these products are structured. Peninsula is well positioned with origination, trading, servicing and management capacity to provide build, distribute and service both life settlement portfolios, as well as tailor-made structured solutions for global investors.