ORLANDO, Fla., Oct. 8, 2014 (GLOBE NEWSWIRE) -- Life settlements have become an accepted asset class among institutional investors and financial advisors, with a number of favorable market conditions setting the stage for sustained growth of the industry, according to speakers this week at the 2014 Annual Fall Life Settlement and Compliance Conference in Scottsdale, Ariz.
The conference ("The Journey Ahead") was hosted by the Life Insurance Settlement Association (LISA), which educates consumers and financial advisors about options for unlocking the hidden value in life insurance policies.
"The demographics of the U.S. favor the life settlements industry, as more Baby Boomers reach retirement age and discover their life insurance policies are valuable assets that can be tapped for cash benefit during their lifetimes," said Alan Buerger, chairman of LISA.
"Another important sign is that new institutional investors have entered our industry recently as they've discovered that our underwriting models are more precise now, which enables them to obtain more predictable returns on their investments in life settlements," said Darwin Bayston, president and chief executive officer of LISA.
A life settlement is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit. Candidates for life settlements are typically 70 or older, with a life insurance policy that has a "face value" of more than $100,000.
"What we're seeing in the marketplace is that the conversation has shifted away from a debate about the pros and cons of life settlements as investments and settlements have now become an accepted asset class by investors and most financial advisors," said John Dallas, chief executive officer of Berkshire Settlements, one of the conference speakers.
The life settlement market has rebounded from the downturn of 2007-2009 and is currently on an upswing. According to The Deal Pipeline, transactions in the secondary market grew to $2.57 billion in face value of policies sold last year, compared to $2.12 billion in 2012.
The keynote speaker for the conference was Jay Olshansky, Ph.D., professor at University of Illinois at Chicago's School of Public Health. Dr. Olshansky walked attendees through some of his research into estimating the duration of life, which indicates that although advancements in science and medicine are extending the average life expectancy for Americans, it is unlikely to ever create conditions where Americans are routinely able to live 100 years or more.
"In spite of what you may read on magazine covers and newspaper headlines, the truth is that the timing of death in human beings has never really changed," said Dr. Olshansky. "It's certainly true that a larger number of people are living longer today than in the past – and that trend will continue – but life span itself is unlikely to change and we're just not going to see a whole generation of Americans suddenly living to be 120 years old. We have fewer infant deaths than we did in the past, but in return we now have more people dying from cancer, heart disease and dementia in their 80s."
Dr. Olshansky's work is part of a body of research that is allowing academics and actuaries to more precisely model life expectancy among various population groups in the U.S. This improved knowledge base is helping consumers, financial advisors and investors all obtain a more transparent and predictable understanding of which life insurance policies are appropriate for settlement.
"There are more than 40 million Americans over the age of 75, and seniors in that age group own between $700-$800 billion worth of life insurance policies," said Bayston. "Our research suggests that approximately 20 percent of those policies are potential candidates for settlement, which is obviously a huge potential market. The business fundamentals and market conditions are now in place for supporting steady and sustained growth in the life settlements industry."
About the Life Insurance Settlement Association
The Life Insurance Settlement Association (LISA) is the nation's oldest and largest organization representing participants in the life settlement Industry, with a current membership of more than 85 companies doing business in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The mission of LISA is to promote the development, integrity and reputation of the life settlement industry and to promote a competitive market for the people it serves. LISA's membership consists of brokers, providers, financing entities and service providers to the industry. For more information, visit www.lisa.org.