Will the Life Settlement Market Exist 10 Years from Now? Yes, predicts industry analyst.
Amid high inflation and fears of a prolonged stock market downturn, it’s no wonder that many financial advisors are helping worried clients preserve and boost their cash reserves. Some clients have chosen to sell unwanted life insurance policies and are using the payout from the life settlement to build a larger cash cushion.
But as economic uncertainty continues to prevail following the mid-term elections, many financial advisors and their clients question whether the life settlement market will exist 10 years from now.
It’s a compelling question that deserves a well-researched response.
Based on the four factors discussed below - as well as our personal insight gained from more than 25 years of experience in the industry - our team at Asset Life Settlements is encouraged that the life settlement market is well-position for continued growth over the long term.
1. Strong Market Demand Forecasted
In a November 1, 2022 news announcement by Conning Inc., a leading research firm that covers the life settlement market, the market forecast calls for a double-digit increase in the annual gross market over the next ten years. The two primary drivers contributing to Conning’s optimistic outlook include the likelihood that (a) seniors will seek sources of income to help offset economic pressures, and (b) the continued strong demand for investors seeking to place their money in alternative asset classes.
Following Conning’s announcement, The Deal published comments from Scott Hawkins, head of insurance research at Conning. "Given the favorable nature of the drivers of life settlement market growth, our analysis of the life settlement market is that the average annual volume of new life settlements over our ten-year forecast is approximately $5.2 billion," Hawkins said.
2. Infusion of New Capital Sources into the Market
New investment capital continues to enter the market – much of which is attributed to the rising interest in "alternative assets" due to the asset class’s non-correction to the financial markets.
As we noted in our article published earlier this year by ThinkAdvisor,
“Recent market volatility, high inflation, and overall economic dynamics are increasing the anxiety levels for financial advisors and clients at or near retirement. But there may be a silver lining for seniors age 65+ who are thinking of selling their unwanted life insurance policies.
The good news is that a volatile stock market coupled with high inflation tends to drive greater interest in the alternative investment asset class. This is due to the asset class’s attractive yield and its low correlation to the movement in the traditional markets. The secondary market for life insurance (life settlements) is included within this alternative asset class.
As new sources of alternative investment capital flow into the market, the purchasing offers from institutional buyers become more competitive. This “supply and demand” trading environment benefits policy sellers by maximizing the value of unwanted policies. And, it benefitsthe client’s licensed agent who may earn compensation on the transaction.
3. Presence of Economic Drivers
Economic pressures are causing more seniors to seek safety in liquidity and other cash assets.
According to survey statistics released earlier this year by the Life Insurance Settlement Association, greater numbers of seniors are benefitting from selling their unwanted policies.
The data below paints a compelling picture of the magnitude of the secondary market for life insurance. More importantly, the numbers illustrate the transformative impact that the market is having on generating liquidity for thousands of policy sellers every year.
✔ 3,000+ life settlements were transacted in 2021.
✔ $750 Million: The amount consumers were paid in 2021.
✔ $660 million (7.8 times) beyond cash surrender value was paid out.
✔ $1.35 Million: The average net death benefit per transaction in 2021.
4. Consumer-Friendly Qualification Factors
Many financial professionals and their clients are not aware that even term policies, if convertible, may qualify for a life settlement. Fortunately, the awareness about term-conversion life settlements is broadening based on the uptick we are seeing in these transactions.
Non-medical underwriting is also another consumer-friendly qualification factor that has evolved recently. Asset Life Settlements is currently working with multiple capital sources that make cash and retained death benefit offers on life settlement cases that meet certain criteria, without requiring full medical records or LE reports.
Our capital sources are targeting healthy insureds, and underwriting solely based on the insured’s age. This enables us to make offers for your client’s policy within 24 hours of receipt of a current in-force illustration and insured’s date of birth. There are no out-of-pocket costs or paperwork required on the part of your client.
Irrespective of a troubling economy and uncertainty about a future recession, the life settlement market remains strong and continues to provide seniors with a sensible exit strategy for unwanted policies. In addition to optimizing the cash liquidity of a dormant asset, clients who qualify for a life settlement will eliminate an unwanted premium expense while receiving a cash windfall to help boost their retirement assets.
Feel free to contact us at 855-768-9085 to discuss your questions or to request a free policy appraisal.