By Dealflow Media
J.P. Morgan is getting out of the life settlement market, a person familiar with the company said.
The person told The Life Settlements Wire that J.P. Morgan expects to wind down its operation over the next few months.
J.P. Morgan is the second major investment bank to exit the market in recent months. Goldman Sachs said it was leaving the market in January, disappointed in its lack of growth.
J.P. Morgan had entered the business around 2007. It had a smaller operation than its competitors, employing fewer than 10 people in its life finance business, the person familiar with the company said.
Rob Finfer, chief executive of Bethesda, Md.-based life settlement broker Integrity Capital Partners said he hasn’t seen J.P. Morgan purchasing policies for at least a year.
“I would not have referred to them as a major player in the life settlement space,” Finfer said. Still, “I’m disappointed when any funding source decides to leave the space, especially in the environment where we have so many excellent policies for sale.”
J.P. Morgan spokesman Brian Marchiony declined to comment.
Life Settlements
Monday, June 21, 2010
Thursday, June 3, 2010
Life Insurers to Settle with Life Settlements?
A recent article in Seeking Alpha examined the love hate relationship between life insurance carriers and the life settlement industry. If the carriers can't beat em, should they join em? Below is an excerpt from Clark Troy's article.
New York Life and the Actuarial Society of Greater New York hosted Michael Fasano of Fasano Associates for a seminar called “Mortality Curves: Lessons from Life Settlement Underwriting” on Friday, May 28. On the face of it, this would not seem very shocking, were it not for the enmity general shown to the life settlements industry by life insurers. Life settlements, and particularly stranger-owned life insurance (STOLI), have in recent years been the bête noire of the life insurance industry. Life insurance trade association the American Council of Life Insurers has vigorously lobbied for strong legislation protecting senior citizens (and its own profitability) from fraudulent life settlement origination such as STOLI, and large states and key life settlements markets such as New York and California have enacted such laws. The life settlements industry, acknowledging that the unsavory practices of STOLI have besmirched its image, also generally supports such legislation.
However, much as it may hate and fear the life settlements industry, life insurers and reinsurers have shown an interest in life expectancy providers such as Fasano Associates (the other two leaders are American Viatical Services and 21st Services), who estimate the longevity of senior citizens who are considering entering into a life settlement transactions. These vendors provide the key data point for evaluating life settlements and, in so doing, have accumulated considerable expertise and data assets for estimating how long older people with health problems are likely to live. This is obviously something life insurers are interested in too. Although the life expectancy providers have had some pretty major hiccups along the way, they’ve acquired enough domain knowledge that insurers are curious.
Could a life insurer or reinsurer seek to partner with or acquire a life expectancy provider? It’s not outside the realm of possibility, but it would depend on pricing, which would in turn depend on how the life settlements market was doing as a whole. For the life settlements market to flourish, institutional investors need to be in a risk-seeking mode. Through the first quarter of 2010, with accommodative fiscal policy successfully encouraging a global risk trade and thinning spreads between sovereign and corporate as well as G20 and emerging market debt, prospects for life settlements -- an asset with non-correlated fixed income like returns – might have been thought to be encouraging, although in fact the flows of capital towards life settlements slowed. The big institutional investors to date have been German, primarily pension funds, and German institutional investors have other things on their minds these days.
Originally Published - Seeking Alpha, Jun 2, 2010
New York Life and the Actuarial Society of Greater New York hosted Michael Fasano of Fasano Associates for a seminar called “Mortality Curves: Lessons from Life Settlement Underwriting” on Friday, May 28. On the face of it, this would not seem very shocking, were it not for the enmity general shown to the life settlements industry by life insurers. Life settlements, and particularly stranger-owned life insurance (STOLI), have in recent years been the bête noire of the life insurance industry. Life insurance trade association the American Council of Life Insurers has vigorously lobbied for strong legislation protecting senior citizens (and its own profitability) from fraudulent life settlement origination such as STOLI, and large states and key life settlements markets such as New York and California have enacted such laws. The life settlements industry, acknowledging that the unsavory practices of STOLI have besmirched its image, also generally supports such legislation.
However, much as it may hate and fear the life settlements industry, life insurers and reinsurers have shown an interest in life expectancy providers such as Fasano Associates (the other two leaders are American Viatical Services and 21st Services), who estimate the longevity of senior citizens who are considering entering into a life settlement transactions. These vendors provide the key data point for evaluating life settlements and, in so doing, have accumulated considerable expertise and data assets for estimating how long older people with health problems are likely to live. This is obviously something life insurers are interested in too. Although the life expectancy providers have had some pretty major hiccups along the way, they’ve acquired enough domain knowledge that insurers are curious.
Could a life insurer or reinsurer seek to partner with or acquire a life expectancy provider? It’s not outside the realm of possibility, but it would depend on pricing, which would in turn depend on how the life settlements market was doing as a whole. For the life settlements market to flourish, institutional investors need to be in a risk-seeking mode. Through the first quarter of 2010, with accommodative fiscal policy successfully encouraging a global risk trade and thinning spreads between sovereign and corporate as well as G20 and emerging market debt, prospects for life settlements -- an asset with non-correlated fixed income like returns – might have been thought to be encouraging, although in fact the flows of capital towards life settlements slowed. The big institutional investors to date have been German, primarily pension funds, and German institutional investors have other things on their minds these days.
Originally Published - Seeking Alpha, Jun 2, 2010
Tuesday, May 18, 2010
Texas called Wild West Of Life Settlements.
As most know, life settlement legislation varies from state to state. Texas has been pegged as the "Wild West" for life settlements by Dave Lieber of the Star Telegram. He asserts that lax regulation and oversight fuel fly by night schemes. I can't disagree more from a life settlement broker's perspective. Their compliance requirements are thorough and involved. In fact, they have to approve every single page of a life settlement broker's website before it can be considered in compliance. Nonetheless, he has an interesting point of view. Below is an excerpt so you can make up your own mind:
Ninety-nine years ago, legendary U.S. Supreme Court Justice Oliver Wendell Holmes Jr. wrote an opinion that a life insurance policy was a person's property and could be sold.
A century later, the concept has morphed into "life settlement" contracts, also called "death bets" or "death contracts."
People who need quick cash can sell their policies to licensed brokers, who then sell them to third-party investors.
The investors pay the premiums until the person dies. Then all the benefits go to the investors instead of the original beneficiaries. If someone lives longer than expected, investors may lose money. Otherwise, the investor wins.
"You're betting on death," says Joe Rotunda, director of the Texas State Securities Board's enforcement division. "You're betting somebody is going to die by a certain date and you're not going to have to shell out any additional money until you see a return on your investment. It sounds good, but there's a lot of risk involved."
Life insurance policies are often bundled together and sold on Wall Street. These are called "death bonds." Investors don't know whose policies they are buying.
Under Texas law, policies sold this way must be registered as securities. But in practice, some life settlement contracts are kept off the grid. Brokers aren't always licensed, and the policies they sell aren't registered. That can lead to fraud.
In fact, Rotunda says of the Texas life settlement industry, "It is the Wild West."
"It's always been a problem, but the amount of fraud we're seeing now has, anecdotally, increased tremendously," he said.
As enforcement division chief, Rotunda leads investigations into life settlement cases. In April, the board accused a Plano company of not being licensed and registered and of making misleading promises to investors. Deception is a key component of making a case for securities fraud.
But enforcement is tough. Life settlements are not regulated as thoroughly as much of the rest of the insurance and securities market, Rotunda says. One problem: The term life settlement does not appear in the Texas Securities Act.
That means each allegation of fraud has to be individually examined to see if it can meet the broad terms for securities described in state law.
"It's not as straightforward or black-and-white as it would be in other states," Rotunda says.
That has made Texas attractive to some slick operators, others say.
"Texas is a hot spot," says Gloria Wolk, a North Carolina-based consumer advocate who focuses on life settlement fraud. "Texas has more people working as brokers and providers than any other state because they don't provide oversight. There is no regulation. When things get really hot about some company, with too many complaints, then the state goes and does something."
Rotunda acknowledges that his hands are sometimes tied by the law but says his agency still goes after those who break the rules.
Read more: http://www.star-telegram.com/2010/05/01/2156969/texas-is-the-wild-west-of-life.html#ixzz0v1CUYfqf
Ninety-nine years ago, legendary U.S. Supreme Court Justice Oliver Wendell Holmes Jr. wrote an opinion that a life insurance policy was a person's property and could be sold.
A century later, the concept has morphed into "life settlement" contracts, also called "death bets" or "death contracts."
People who need quick cash can sell their policies to licensed brokers, who then sell them to third-party investors.
The investors pay the premiums until the person dies. Then all the benefits go to the investors instead of the original beneficiaries. If someone lives longer than expected, investors may lose money. Otherwise, the investor wins.
"You're betting on death," says Joe Rotunda, director of the Texas State Securities Board's enforcement division. "You're betting somebody is going to die by a certain date and you're not going to have to shell out any additional money until you see a return on your investment. It sounds good, but there's a lot of risk involved."
Life insurance policies are often bundled together and sold on Wall Street. These are called "death bonds." Investors don't know whose policies they are buying.
Under Texas law, policies sold this way must be registered as securities. But in practice, some life settlement contracts are kept off the grid. Brokers aren't always licensed, and the policies they sell aren't registered. That can lead to fraud.
In fact, Rotunda says of the Texas life settlement industry, "It is the Wild West."
"It's always been a problem, but the amount of fraud we're seeing now has, anecdotally, increased tremendously," he said.
As enforcement division chief, Rotunda leads investigations into life settlement cases. In April, the board accused a Plano company of not being licensed and registered and of making misleading promises to investors. Deception is a key component of making a case for securities fraud.
But enforcement is tough. Life settlements are not regulated as thoroughly as much of the rest of the insurance and securities market, Rotunda says. One problem: The term life settlement does not appear in the Texas Securities Act.
That means each allegation of fraud has to be individually examined to see if it can meet the broad terms for securities described in state law.
"It's not as straightforward or black-and-white as it would be in other states," Rotunda says.
That has made Texas attractive to some slick operators, others say.
"Texas is a hot spot," says Gloria Wolk, a North Carolina-based consumer advocate who focuses on life settlement fraud. "Texas has more people working as brokers and providers than any other state because they don't provide oversight. There is no regulation. When things get really hot about some company, with too many complaints, then the state goes and does something."
Rotunda acknowledges that his hands are sometimes tied by the law but says his agency still goes after those who break the rules.
Read more: http://www.star-telegram.com/2010/05/01/2156969/texas-is-the-wild-west-of-life.html#ixzz0v1CUYfqf
Wednesday, April 28, 2010
Brokers See Life Settlement Growth Opportunities
Thank God we are finally seeing some positive news from and about life settlement brokers. It appears things may be turning around in the life settlement industry! Finally! Below is an excerpt from a recent National Underwriter Magazine article by Trevor Thomas. It was published on 4/12/2010.
The life settlement business has been set back by the recession, but a number of factors are pointing to growth opportunities, according to settlement brokers speaking on at panel at the recent Life Settlement Summit in Miami.
More educated buyers and more realistic life expectancies are helping to create a demand for “quality paper,” said Mike Liebowitz, president and chief executive officer, Invescor Ltd., Farmington Hills, Mich. In addition, projected returns on settlement investments “are starting to be more realistic,” he said. “Buyers are coming back.”
Russel Dorsett, co-managing director of Select Life Corporation and director, Veris Settlement Partners, Rockville, Md., said the market “is coming back into balance. In 2009, there was a lot of paper and not enough buyers. Now we are rejecting three of five policies, so that’s improving.”
Rob Haynie, managing director, Life Insurance Settlements Inc. Fort Lauderdale, Fla., agreed there has been a recent rise in interest among buyers.
“There is more competitive bidding now than 12 months ago,” he said. “Capital is coming back now.”
But capital is looking for improved life expectancy projections, he said.
Jon B. Mendelsohn, president and chief executive officer, Ashar Group L.L.C., Orlando, Fla., says the settlement industry has helped consumers generate $1 billion from their life policies.
“We have a tremendous amount of legitimate inventories,” said Mendelsohn.
Members of the panel felt that increasing regulation of the life settlement industry by the states has been largely good for the industry.
Liebowitz said that 41 states, with 85% to 90% of the nation’s population, have regulations covering life settlements. This has helped stabilize the industry, he said.
“The fact that regulation is pervasive is a good thing all around,” Dorsett agreed. “Providers that don’t play by the rules are finding fewer places to play at all. We providers have to educate consumers and producers.”
In heavily regulated states, such as Virginia and Vermont, there is virtually no settlement activity, noted Dorsett.
“Other places, such as California and New York, will be good place to work.”
He said that although the industry can live with most recent state legislation, “there are some off-the-wall proposals being discussed. We can’t let down our guard; bad regulation once passed tends to spread to other jurisdictions.”
Haynie cited estimates by the American Council of Life Insurers, Washington that a total of $20 trillion in life face value is in force in the U.S. Yet 97% is in policies that ultimately lapse or are surrendered, he said.
“We try to get consumers good value,” he said.
Haynie said he thinks the industry needs to keep its message to seniors short, sweet and positive. “Seniors get turned off if you start with a negative,” he observed.
More than half of life insurance agents have a potential of substantial new income from settlements, Liebowitz said. “Agents often call looking for help for a client,” he reported.
Momentum for settlements dropped off in 2008-2009, but Liebowitz reported he recently has been having more conversations with life broker dealers.
“We’re starting to see momentum again,” he said. “We need legitimate, clean paper.”
“We have zero tolerance for any paper that does not seem to have originated legitimately,” Mendelsohn said. “We’ve had a tremendous amount of interest. The settlement industry is getting back to basics. We have serious players.”
Liebowitz said the life insurance industry is pushing back against life settlements “because they (insurers) realize they need to change. This industry will succeed; they can’t stop it.”
There has been a significant increase in people over-age-65 buying policies because more of them know life settlement is an option, Liebowitz reported. The vast majority of those who sell policies use the money for living expenses, he said.
The Life Settlement Summit was sponsored by National Underwriter Life & Health and other Summit Business Media publications.
The life settlement business has been set back by the recession, but a number of factors are pointing to growth opportunities, according to settlement brokers speaking on at panel at the recent Life Settlement Summit in Miami.
More educated buyers and more realistic life expectancies are helping to create a demand for “quality paper,” said Mike Liebowitz, president and chief executive officer, Invescor Ltd., Farmington Hills, Mich. In addition, projected returns on settlement investments “are starting to be more realistic,” he said. “Buyers are coming back.”
Russel Dorsett, co-managing director of Select Life Corporation and director, Veris Settlement Partners, Rockville, Md., said the market “is coming back into balance. In 2009, there was a lot of paper and not enough buyers. Now we are rejecting three of five policies, so that’s improving.”
Rob Haynie, managing director, Life Insurance Settlements Inc. Fort Lauderdale, Fla., agreed there has been a recent rise in interest among buyers.
“There is more competitive bidding now than 12 months ago,” he said. “Capital is coming back now.”
But capital is looking for improved life expectancy projections, he said.
Jon B. Mendelsohn, president and chief executive officer, Ashar Group L.L.C., Orlando, Fla., says the settlement industry has helped consumers generate $1 billion from their life policies.
“We have a tremendous amount of legitimate inventories,” said Mendelsohn.
Members of the panel felt that increasing regulation of the life settlement industry by the states has been largely good for the industry.
Liebowitz said that 41 states, with 85% to 90% of the nation’s population, have regulations covering life settlements. This has helped stabilize the industry, he said.
“The fact that regulation is pervasive is a good thing all around,” Dorsett agreed. “Providers that don’t play by the rules are finding fewer places to play at all. We providers have to educate consumers and producers.”
In heavily regulated states, such as Virginia and Vermont, there is virtually no settlement activity, noted Dorsett.
“Other places, such as California and New York, will be good place to work.”
He said that although the industry can live with most recent state legislation, “there are some off-the-wall proposals being discussed. We can’t let down our guard; bad regulation once passed tends to spread to other jurisdictions.”
Haynie cited estimates by the American Council of Life Insurers, Washington that a total of $20 trillion in life face value is in force in the U.S. Yet 97% is in policies that ultimately lapse or are surrendered, he said.
“We try to get consumers good value,” he said.
Haynie said he thinks the industry needs to keep its message to seniors short, sweet and positive. “Seniors get turned off if you start with a negative,” he observed.
More than half of life insurance agents have a potential of substantial new income from settlements, Liebowitz said. “Agents often call looking for help for a client,” he reported.
Momentum for settlements dropped off in 2008-2009, but Liebowitz reported he recently has been having more conversations with life broker dealers.
“We’re starting to see momentum again,” he said. “We need legitimate, clean paper.”
“We have zero tolerance for any paper that does not seem to have originated legitimately,” Mendelsohn said. “We’ve had a tremendous amount of interest. The settlement industry is getting back to basics. We have serious players.”
Liebowitz said the life insurance industry is pushing back against life settlements “because they (insurers) realize they need to change. This industry will succeed; they can’t stop it.”
There has been a significant increase in people over-age-65 buying policies because more of them know life settlement is an option, Liebowitz reported. The vast majority of those who sell policies use the money for living expenses, he said.
The Life Settlement Summit was sponsored by National Underwriter Life & Health and other Summit Business Media publications.
The life settlement business has been set back by the recession, but a number of factors are pointing to growth opportunities, according to settlement brokers speaking on at panel at the recent Life Settlement Summit in Miami.
More educated buyers and more realistic life expectancies are helping to create a demand for “quality paper,” said Mike Liebowitz, president and chief executive officer, Invescor Ltd., Farmington Hills, Mich. In addition, projected returns on settlement investments “are starting to be more realistic,” he said. “Buyers are coming back.”
Russel Dorsett, co-managing director of Select Life Corporation and director, Veris Settlement Partners, Rockville, Md., said the market “is coming back into balance. In 2009, there was a lot of paper and not enough buyers. Now we are rejecting three of five policies, so that’s improving.”
Rob Haynie, managing director, Life Insurance Settlements Inc. Fort Lauderdale, Fla., agreed there has been a recent rise in interest among buyers.
“There is more competitive bidding now than 12 months ago,” he said. “Capital is coming back now.”
But capital is looking for improved life expectancy projections, he said.
Jon B. Mendelsohn, president and chief executive officer, Ashar Group L.L.C., Orlando, Fla., says the settlement industry has helped consumers generate $1 billion from their life policies.
“We have a tremendous amount of legitimate inventories,” said Mendelsohn.
Members of the panel felt that increasing regulation of the life settlement industry by the states has been largely good for the industry.
Liebowitz said that 41 states, with 85% to 90% of the nation’s population, have regulations covering life settlements. This has helped stabilize the industry, he said.
“The fact that regulation is pervasive is a good thing all around,” Dorsett agreed. “Providers that don’t play by the rules are finding fewer places to play at all. We providers have to educate consumers and producers.”
In heavily regulated states, such as Virginia and Vermont, there is virtually no settlement activity, noted Dorsett.
“Other places, such as California and New York, will be good place to work.”
He said that although the industry can live with most recent state legislation, “there are some off-the-wall proposals being discussed. We can’t let down our guard; bad regulation once passed tends to spread to other jurisdictions.”
Haynie cited estimates by the American Council of Life Insurers, Washington that a total of $20 trillion in life face value is in force in the U.S. Yet 97% is in policies that ultimately lapse or are surrendered, he said.
“We try to get consumers good value,” he said.
Haynie said he thinks the industry needs to keep its message to seniors short, sweet and positive. “Seniors get turned off if you start with a negative,” he observed.
More than half of life insurance agents have a potential of substantial new income from settlements, Liebowitz said. “Agents often call looking for help for a client,” he reported.
Momentum for settlements dropped off in 2008-2009, but Liebowitz reported he recently has been having more conversations with life broker dealers.
“We’re starting to see momentum again,” he said. “We need legitimate, clean paper.”
“We have zero tolerance for any paper that does not seem to have originated legitimately,” Mendelsohn said. “We’ve had a tremendous amount of interest. The settlement industry is getting back to basics. We have serious players.”
Liebowitz said the life insurance industry is pushing back against life settlements “because they (insurers) realize they need to change. This industry will succeed; they can’t stop it.”
There has been a significant increase in people over-age-65 buying policies because more of them know life settlement is an option, Liebowitz reported. The vast majority of those who sell policies use the money for living expenses, he said.
The Life Settlement Summit was sponsored by National Underwriter Life & Health and other Summit Business Media publications.
The life settlement business has been set back by the recession, but a number of factors are pointing to growth opportunities, according to settlement brokers speaking on at panel at the recent Life Settlement Summit in Miami.
More educated buyers and more realistic life expectancies are helping to create a demand for “quality paper,” said Mike Liebowitz, president and chief executive officer, Invescor Ltd., Farmington Hills, Mich. In addition, projected returns on settlement investments “are starting to be more realistic,” he said. “Buyers are coming back.”
Russel Dorsett, co-managing director of Select Life Corporation and director, Veris Settlement Partners, Rockville, Md., said the market “is coming back into balance. In 2009, there was a lot of paper and not enough buyers. Now we are rejecting three of five policies, so that’s improving.”
Rob Haynie, managing director, Life Insurance Settlements Inc. Fort Lauderdale, Fla., agreed there has been a recent rise in interest among buyers.
“There is more competitive bidding now than 12 months ago,” he said. “Capital is coming back now.”
But capital is looking for improved life expectancy projections, he said.
Jon B. Mendelsohn, president and chief executive officer, Ashar Group L.L.C., Orlando, Fla., says the settlement industry has helped consumers generate $1 billion from their life policies.
“We have a tremendous amount of legitimate inventories,” said Mendelsohn.
Members of the panel felt that increasing regulation of the life settlement industry by the states has been largely good for the industry.
Liebowitz said that 41 states, with 85% to 90% of the nation’s population, have regulations covering life settlements. This has helped stabilize the industry, he said.
“The fact that regulation is pervasive is a good thing all around,” Dorsett agreed. “Providers that don’t play by the rules are finding fewer places to play at all. We providers have to educate consumers and producers.”
In heavily regulated states, such as Virginia and Vermont, there is virtually no settlement activity, noted Dorsett.
“Other places, such as California and New York, will be good place to work.”
He said that although the industry can live with most recent state legislation, “there are some off-the-wall proposals being discussed. We can’t let down our guard; bad regulation once passed tends to spread to other jurisdictions.”
Haynie cited estimates by the American Council of Life Insurers, Washington that a total of $20 trillion in life face value is in force in the U.S. Yet 97% is in policies that ultimately lapse or are surrendered, he said.
“We try to get consumers good value,” he said.
Haynie said he thinks the industry needs to keep its message to seniors short, sweet and positive. “Seniors get turned off if you start with a negative,” he observed.
More than half of life insurance agents have a potential of substantial new income from settlements, Liebowitz said. “Agents often call looking for help for a client,” he reported.
Momentum for settlements dropped off in 2008-2009, but Liebowitz reported he recently has been having more conversations with life broker dealers.
“We’re starting to see momentum again,” he said. “We need legitimate, clean paper.”
“We have zero tolerance for any paper that does not seem to have originated legitimately,” Mendelsohn said. “We’ve had a tremendous amount of interest. The settlement industry is getting back to basics. We have serious players.”
Liebowitz said the life insurance industry is pushing back against life settlements “because they (insurers) realize they need to change. This industry will succeed; they can’t stop it.”
There has been a significant increase in people over-age-65 buying policies because more of them know life settlement is an option, Liebowitz reported. The vast majority of those who sell policies use the money for living expenses, he said.
The Life Settlement Summit was sponsored by National Underwriter Life & Health and other Summit Business Media publications.
Monday, March 1, 2010
Goldman Sachs Exits Life Settlements
National Financial Partners Corp. has taken on full ownership of Institutional Life Services LLC, a venture that The Goldman Sachs Group Inc. recently exited.
Institutional Life Services LLC started out in 2007 as a venture between NFP, affiliates of Goldman and Genworth Financial Inc. Back then, it was intended to act as a life settlement exchange.
Genworth and Goldman have since pulled out of the investment, but. According to a filing with the Securities and Exchange Commission, NFP took on full ownership of the enterprise in December.
ILS will act as a life settlement provider, rather than as a life settlement index, according to the filing. NFP also bought full ownership of Institutional Life Administration LLC.
NFP’s acquisition of the full ILS business came just before Goldman announced its departure from the life settlements arena by shuttering its QxX mortality index and closing down Longmore Capital, a life settlements provider.
Goldman’s vision of a booming institutional market simply wasn’t bearing fruit, Goldman spokesman Michael DuVally had said.
NFP has been a player on the retail side of the life settlements business. Some of its affiliates provide those services to investors who want to sell an unneeded policy.
That corner of the business hasn’t always been simple, though. NFP’s commission and fee revenue declined last year to $948.3 million, from $1.15 billion in 2008. The dropoff stemmed, in large part, from falling sales of the company’s retail life and life settlements products, which tend to be high-commission products
Further, the company’s affiliates have had a number of legal brushes related to life settlements. Media personality Larry King sued NFP-affiliated firm The Meltzer Group Inc. in 2007 for breach of fiduciary duty. He claimed he was told to buy $10 million in life insurance coverage and then sell it to another party for $550,000. Mr. King received a settlement in that claim.
In another suit filed last year in Ohio, Louis Levin, an 81-year-ancient investor, claimed NFP-affiliate Howard Kaye Insurance Agency Inc. — along with principal Howard Kaye and Barry Kaye and Associates Inc. — advised him to buy a $5 million policy. According to the suit, the defendants told Mr. Levin he would earn a “substantial profit” for selling the policy on the life settlements market. The firm wasn’t able to locate buyers, and Mr. Levin wound up spending $322,000 on premiums. He is suing for breach of contract. NFP itself was not named in any of these suits.
Institutional Life Services LLC started out in 2007 as a venture between NFP, affiliates of Goldman and Genworth Financial Inc. Back then, it was intended to act as a life settlement exchange.
Genworth and Goldman have since pulled out of the investment, but. According to a filing with the Securities and Exchange Commission, NFP took on full ownership of the enterprise in December.
ILS will act as a life settlement provider, rather than as a life settlement index, according to the filing. NFP also bought full ownership of Institutional Life Administration LLC.
NFP’s acquisition of the full ILS business came just before Goldman announced its departure from the life settlements arena by shuttering its QxX mortality index and closing down Longmore Capital, a life settlements provider.
Goldman’s vision of a booming institutional market simply wasn’t bearing fruit, Goldman spokesman Michael DuVally had said.
NFP has been a player on the retail side of the life settlements business. Some of its affiliates provide those services to investors who want to sell an unneeded policy.
That corner of the business hasn’t always been simple, though. NFP’s commission and fee revenue declined last year to $948.3 million, from $1.15 billion in 2008. The dropoff stemmed, in large part, from falling sales of the company’s retail life and life settlements products, which tend to be high-commission products
Further, the company’s affiliates have had a number of legal brushes related to life settlements. Media personality Larry King sued NFP-affiliated firm The Meltzer Group Inc. in 2007 for breach of fiduciary duty. He claimed he was told to buy $10 million in life insurance coverage and then sell it to another party for $550,000. Mr. King received a settlement in that claim.
In another suit filed last year in Ohio, Louis Levin, an 81-year-ancient investor, claimed NFP-affiliate Howard Kaye Insurance Agency Inc. — along with principal Howard Kaye and Barry Kaye and Associates Inc. — advised him to buy a $5 million policy. According to the suit, the defendants told Mr. Levin he would earn a “substantial profit” for selling the policy on the life settlements market. The firm wasn’t able to locate buyers, and Mr. Levin wound up spending $322,000 on premiums. He is suing for breach of contract. NFP itself was not named in any of these suits.
Wednesday, February 10, 2010
European Life Settlement Trade
As the life settlement market struggles to recover from a tough 2008 and 2009, a group of American life settlement representatives are embarking on a European trade mission. This is exactly the kind of proactive thinking that we need more of in the industry to lift from the difficult times we are now facing. The idea is to cultivate international activity in the US longevity market. Below is an excerpt of the press release.
LUXEMBOURG, February 08, 2010 -- Carlisle Management Company, a leading alternative assets manager and manager of the Luxembourg Long Term Growth Life Settlement Fund, today announced its sponsorship of the First European Life Settlements Trade Mission.
"We are extremely pleased to be a part of the foundation for a European based life settlement organization, ELSA sets standards for the European life settlement industry and promotes transparency by providing accurate, authoritative information to the investment community," said Tim Mol, Carlisle's Chief Operating Officer.
A life settlement is the transfer of ownership and beneficiary rights of an unwanted or unneeded life insurance policy in exchange for a cash settlement. Life settlements represent an estimated $12 billion annual secondary market and one of the fastest growing financial sectors today. As capital sources continue to search for stable returns and low volatility, life settlements are already playing a significant role in the asset allocation strategies of leading banks, financial institutions, insurance companies and mutual funds.
LUXEMBOURG, February 08, 2010 -- Carlisle Management Company, a leading alternative assets manager and manager of the Luxembourg Long Term Growth Life Settlement Fund, today announced its sponsorship of the First European Life Settlements Trade Mission.
"We are extremely pleased to be a part of the foundation for a European based life settlement organization, ELSA sets standards for the European life settlement industry and promotes transparency by providing accurate, authoritative information to the investment community," said Tim Mol, Carlisle's Chief Operating Officer.
A life settlement is the transfer of ownership and beneficiary rights of an unwanted or unneeded life insurance policy in exchange for a cash settlement. Life settlements represent an estimated $12 billion annual secondary market and one of the fastest growing financial sectors today. As capital sources continue to search for stable returns and low volatility, life settlements are already playing a significant role in the asset allocation strategies of leading banks, financial institutions, insurance companies and mutual funds.
Friday, January 29, 2010
5 Things To Know About Life Settlements
As someone who has been in the life settlement industry it gets old hearing people bash life settlements. My philosophy is that they aren't for everyone, but if they can help you or a loved one...why knock it? In the interest of being fair and balanced, I am passing along some "tips" that everyone should take into consideration about life settlements.
From Money Magazine, Jan. 26, 2010
1. Your parents may be getting sold on these
In some retirement hot spots, such as South Florida, advertising for "life settlements" is ubiquitous. The pitch? Sell us your permanent (cash-value) life insurance policy and you can have a chunk of the death benefit now. In exchange, the company buying the policy becomes the owner and beneficiary and gets the full payout when you die.
Most settlement firms want policies likely to pay off within 10 years, so the elderly are prime targets. For those who anticipate running out of money, it's an appealing idea.
You'll probably hear this sell more often in the coming years: Wall Street is turning pools of insurance policies into tradable securities (as it did with mortgages), which will increase investor demand.
2. It's hard to know a good deal from a bad one
The life settlement industry is run by small investment firms, and there isn't a central marketplace to solicit bids. So there's no "going rate." A 70-year-old man with high blood pressure and heart disease could get offers from $116,000 to $162,000 for a $1 million policy, reports broker Golden Gateway Financial (compared with about half that if he surrendered it to the insurer). Thus, it pays for anyone considering a settlement to get several bids.
3. Brokers help obscure the process
Since many settlement firms won't deal with consumers directly, shopping around typically means going to one or more brokers. But brokers' fee structures vary widely -- from 1% of the death benefit to 15% of the difference between the offer and the policy's surrender value -- and they're not always transparent. That makes it tricky to compare offers, says Connecticut insurance commissioner Thomas Sullivan. So ask for the offers minus all charges.
4. Your insurer hates them
Insurance companies assume some policyholders will stop paying premiums -- meaning the firms will have to foot only a small surrender value, vs. a big death benefit. Since investors make good on policies that might otherwise lapse, insurers pay more death benefits, which makes them none too happy.
That's led many insurers to sweeten the payout for surrendering. Some even let you partially cash out but keep the policy active at a lesser death benefit. It's worth asking the insurer what it could do for you, and weighing that against settlement offers.
5. There are alternatives
Before taking a settlement, "you have to ask, 'Who will go unprotected if this policy is sold?' " says Steven Weisbart of the Insurance Information Institute. If it's your parents who can't bear the premiums, you may want to help. It'll be worth your investment if you stand to inherit, or if keeping the policy in force means you won't be financially supporting Mom when Dad passes on.
If your folks just need money but still could benefit from the policy, help them consider other options, such as selling their home or taking out a reverse mortgage.
From Money Magazine, Jan. 26, 2010
1. Your parents may be getting sold on these
In some retirement hot spots, such as South Florida, advertising for "life settlements" is ubiquitous. The pitch? Sell us your permanent (cash-value) life insurance policy and you can have a chunk of the death benefit now. In exchange, the company buying the policy becomes the owner and beneficiary and gets the full payout when you die.
Most settlement firms want policies likely to pay off within 10 years, so the elderly are prime targets. For those who anticipate running out of money, it's an appealing idea.
You'll probably hear this sell more often in the coming years: Wall Street is turning pools of insurance policies into tradable securities (as it did with mortgages), which will increase investor demand.
2. It's hard to know a good deal from a bad one
The life settlement industry is run by small investment firms, and there isn't a central marketplace to solicit bids. So there's no "going rate." A 70-year-old man with high blood pressure and heart disease could get offers from $116,000 to $162,000 for a $1 million policy, reports broker Golden Gateway Financial (compared with about half that if he surrendered it to the insurer). Thus, it pays for anyone considering a settlement to get several bids.
3. Brokers help obscure the process
Since many settlement firms won't deal with consumers directly, shopping around typically means going to one or more brokers. But brokers' fee structures vary widely -- from 1% of the death benefit to 15% of the difference between the offer and the policy's surrender value -- and they're not always transparent. That makes it tricky to compare offers, says Connecticut insurance commissioner Thomas Sullivan. So ask for the offers minus all charges.
4. Your insurer hates them
Insurance companies assume some policyholders will stop paying premiums -- meaning the firms will have to foot only a small surrender value, vs. a big death benefit. Since investors make good on policies that might otherwise lapse, insurers pay more death benefits, which makes them none too happy.
That's led many insurers to sweeten the payout for surrendering. Some even let you partially cash out but keep the policy active at a lesser death benefit. It's worth asking the insurer what it could do for you, and weighing that against settlement offers.
5. There are alternatives
Before taking a settlement, "you have to ask, 'Who will go unprotected if this policy is sold?' " says Steven Weisbart of the Insurance Information Institute. If it's your parents who can't bear the premiums, you may want to help. It'll be worth your investment if you stand to inherit, or if keeping the policy in force means you won't be financially supporting Mom when Dad passes on.
If your folks just need money but still could benefit from the policy, help them consider other options, such as selling their home or taking out a reverse mortgage.
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