Life settlement sales drop nearly 50% in 2010

We don’t write about life settlements often on Artemis, part of the reason being that we are most interested in life settlement securitization, an area which hasn’t seen a huge amount of activity or news lately. We are aware that a good percentage of our readers have an interest in life settlements as an asset class though and so we felt the headline above worth relaying to you.

A study from Conning Research & Consulting shows that the U.S. life settlement sector saw sales drop by nearly 50% during 2010, to a volume of $3.8 billion in face value. That makes it the third year in a row that sales have dropped.

Conning puts the 2010 drop down to ‘sustained buyers market conditions’ despite an increase in awareness and interest. Of course the asset class is really struggling since investors pulled a lot of money out of the sector in 2009. No amount of marketing effort from newly established life settlement organisations seems to have managed to turn that around, yet.

“Capital remains skittish about returning to this asset class, and most current investors are focused on acquiring distressed portfolios rather than purchasing new policies,” said Conning analyst Scott Hawkins. “Given the combination of death claims and lapses on settled policies, the $36 billion in-force life settlements barely increased over the prior year.”

Conning also note that the secondary market for life settlements has suffered, with volumes down and few investors participating in the area.

Life settlement securitization was thought to be an area of much promise a few years ago and an area that would attract investors from the insurance-linked securities market. It’s still widely thought that the market will grow and securitizations will take off and the marketing engine keeps running as organisations and parties with vested interest in the area continue to promote life settlements.