An Opportunistic Market
As world financial markets continue to fluctuate, traditional investment products have experienced both volatility and diminished performance. Stocks continue to be volatile investments and their movement and value fluctuations have been significant. At this moment there is a substantial flight of private investment from both mutual funds and the equities markets. Many investors today are looking for more conservative non-correlated investments that offer potential for high growth but with less sensitivity to market turmoil.
Never in the history of the US Life Settlement market has there been a more favorable "risk/reward" ratio. There exists an imbalance in the Life Settlement market derived from an abundance of quality Policies offered for settlement and limited capital available for purchase. The imbalance in today's market is producing substantial additional value that will create added return for buyers and investors with less risk.
With regard to risk reduction, the US Life Settlement market has already celebrated its 10th anniversary. Much of the early market stage risk and inefficiencies have been reduced or removed as the young market evolved over a decade into a more regulated and more transparent marketplace with greater standardization.
As affirmed by the US Supreme Court in 1911, a life insurance policy is protected personal property and policy owners have the legal right to sell their policy. However, before market liquidity was created through the emergence of the life settlement industry, surrendering the policy to the primary carrier was the only option for an unwanted or unaffordable policy. The life settlement market has unlocked the economic value in senior life insurance policies. The remarkable growth in this market is being driven by the value created for insurance consumers.
Through market research, Life Policy Dynamics, LLC (a Peninsula Group company) has obtained actual numbers to suggest that life settlement transactions are an attractive option for senior insured consumers. The most recent survey shows an industry average life settlement offer to broker representing 18.5% of the policy face value. The research further reported that the economic value unlocked through a life settlement far exceeds the cash surrender value which averages 4% of policy face value.