Opulen Capital Life Settlement: Economic Downturns: Is the Life Settlement Market Still Relevant?

It takes no genius to see what’s happened within the financial industry and how the same set of unexpected circumstances could affect the insurance industry. With insurance carriers now mixing financial business alongside their insurance business, the reality of a market downturn wiping out insurance reserves is all too real a scenario.

That’s not to say the insurance market is not stable. On the contrary, most insurance companies today have ample reserves and have operated business on a conservative investment strategy. With regulations keeping the two entities separate, few insurance companies are expected to suffer the same losses as with the financial industry. Even with insurance carrier AIG, the problem was isolated to the financial wing of the company and did not affect the insurance side.

This could be good news for the life settlement market. With an influx of people facing retirement in an economic downturn, life settlement solutions could be the answer to riding out a tough economy. Yet as data from a 2008 Society of Actuaries study shows, life insurance policies are being written for a population that is now living longer. That could mean a strain on the life settlement market as policy holders flock to life settlement programs to cash in their policies for a life settlement.

Because of the newfound popularity of life settlement solutions, life settlement buyers are forced to revisit their expected return on investment figures. This has created a tighter life settlement market, a smaller market for premium financed life insurance, and stricter qualification requirements for policy holders.

Availability is not the only issue in the life settlement market – the amount of settlement paid has decreased. And more critically, life settlement investors are looking for older policy holders who pay premiums that are less than 7 percent of their policy’s value.

Buyers are now considering policy holders who fit the following conditions:

1. Is age 70 or older
2. Is holding a universal life, convertible term, or variable universal life policy
3. Is expected to live fewer than 16 years
4. Is paying less than 7 percent of policy value in premiums

That means insurance brokers and life settlement brokers are in the unfavorable position of setting realistic expectations with policy holders. While life settlements may be a viable option, the window of opportunity is closing somewhat, leaving a lot of unhappy clients and creating loss exposure claims for their life settlement and insurance brokers.

All is not lost. Even under the new criteria, many life settlement offers are being made. Most clients can expect 3 to 5 offers, which deliver an average gross settlement of around 15-18 percent. While that is lower than the typical 7 to 10 offers and average 25 percent payout a policy holder would garner pre-2008, these offers are still giving the policy holder options.

We at Opulen Capital suggest that brokers advise their clients about the need for quick decision making. While offers are indeed being made, life settlement buyers are no longer giving clients the luxury of time to make a decision. That’s why we advise brokers to educate policy holders before starting the life settlement process on what can be expected, what constitutes a fair value for their policies, and whether life settlements are a viable arrangement for them.

Located in La Jolla, California, Opulen Capital is a specialized financial services firm focusing on products and services tailored for senior citizens. Opulen Capital is one of the leading firms offering Life Settlement opportunities for high net worth clientele. We leverage unrivaled experience and exclusive relationships in the life settlement marketplace to structure, obtain, and sell life insurance products to maximize cash profits for our valued clients. Opulen Capital’s mission is to continue to provide the best solutions for our clients through the highest level of integrity and service. For more information, visit our website at http://www.OpulenCapital.com or call Opulen at 877-OPULEN-1 (877-678-5361).