Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

S&P acknowledges unique risks, increasing interest in life settlement securitizations


Life settlement securitizations pose a unique set of risks and are one of the more rarely seen types of asset-backed securities. As a result Standard & Poor’s haven’t ever rated a life settlement securitization transaction, but that could change if issuers can address the risks associated with them.

Renewed interest is being seen in life settlements from investors, arrangers and originators according to S&P and they say that they have received several requests to rate these transactions over the past year or so.

S&P have published a report which looks at the unique set of risks that life settlements raise. Factors they say need to be considered when reviewing a life settlement deal include:

  • The number of lives comprising the pool and mortality underwriting history.
  • Fluctuations in insurance carrier credit ratings, which can change over time.
  • Legal and regulatory risks beyond those associated with isolating the assets in the collateral pool from the bankruptcy of the participating entities.
  • Whether there is sufficient cash available to make ongoing premium payments to keep the life policies in force and preserve the death benefits.
  • Administrative duties associated with managing a portfolio of life policies.

They say that they will look at any proposals that they are presented with which seek to address the risks that S&P believes are present in life settlements, and if they think the proposal is adequate they may decide to rate them.

Read the press release from S&P here and you can access the full report here if you subscribe to the Standard & Poor’s Ratings Direct service.

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