Skip to content
26 February 2013

2013 Life Settlement Outlook: Growing Global Investor Confidence Redefines Investor Approach to Alternatives

PatrickBy Patrick McAdams; Investment Director, SL Investment Management

In the UK, the last two years have proved to be a challenging time for the Life Settlements marketplace, due largely to regulatory intervention which has affected domestic investor community perceptions.  Significantly, this is a mood not shared overseas.

In Australasia, for example, where the secondary market is a known and trusted asset class, institutional investors are showing an unprecedented degree of interest, keen to benefit from the window of opportunity that exists in today's buyers' market.   However, shrewd investors know that this opportunity is finite with the equation of supply and demand due to peak in the near future; increased policy demand is likely to result in higher prices for those coming to market for the first time.   As such, investor communities in Asia, Australia and the US where interest is currently highest, are keen not to miss out.

But for now, policy supply looks assured.  In the US, market pundits expect a major expansion in the life settlement market in the next few years partly as a result of regulation that has seen life insurance providers forced to inform consumers about the existence of the secondary market.  In addition, an aging 'baby boomer' generation means that an estimated $125* billion in face value of life insurance may be eligible for life settlements. But after years of worldwide market turbulence, what has sparked the current market buoyancy that has seen capital inflow into the asset class? The answer could lie in the bourgeoning mood of greater investor positivity and confidence.

As the market continues to mature, today's investors are benefiting from industry developments and lessons learned by the fledgling life settlement fund managers of yesterday. With increasing levels of sophistication around valuation and longevity methodologies, double digit returns projections are higher than ever before. No wonder then that sophisticated, innovative Australasian and US institutions have been beating a path to life settlements as a means of capturing attractive, predictive returns for 2013 and beyond.

*'The Life Settlements Report' (18/10/2012), Dealflow Media