Life Settlements: Investors Beware

The Journal of Payment Systems Law

PUBLISHED ON: March 6, 2007

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This article originally appeared in Anderson Kill's Securities Professional's Alert (November 2006).

The growth of the life settlement industry over the last decade is nothing short of remarkable – a recent study pegged the current market at $13 billion and projected the industry to grow to over $160 billion in coming years. The industry involves the purchase of life insurance policies by investors (sometimes called stranger-owned insurance) and in many cases, the subsequent securitization of numerous stranger-owned life insurance policies in large investment pools. The Wall Street Journal has publicized this burgeoning market and highlighted the growing concern among regulators regarding life settlements. Lately, life settlements have been the object of increased media attention and industry debate about their legitimacy. With such immense growth potential, institutional investors are entering the market looking to profit from existing practices and attempting to cultivate new ones.