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Life Settlements Hit $5.5 Billion Last Year: Conning

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The life settlements market continues to grow fast, a new study concludes.

The amount of life settlements business grew to $5.5 billion in life insurance policy face amounts in 2005, up from $3.3 billion in 2004, says Conning Research and Consulting Inc., Hartford.

Thanks to available capital and continued aggressive marketing, the market has grown from $2 billion in 2002, according to an earlier Conning estimate.

Life settlements are offered to seniors who hold cash-value life insurance policies they think they no longer want or need. The idea is to give seniors an alternative to surrendering their policies by offering them a settlement payment in return for signing the death benefit over to the life-settlement company.

George McKeon, an analyst at Conning, says a big reason for the recent growth is an increasing amount of cash life settlement firms have available for buying up life insurance policies.

Typical compensation for an agent arranging a life settlement is either 6% of the death benefit or a third of the excess of the settlement payment over the policy’s surrender value–whichever is less, according to Conning.

For a policy with a death benefit of $1.5 million, the typical payment would be $450,000, with a commission to the producer of close to $75,000, Conning estimates.

Life settlement providers are interested in policies covering clients 65 years old and older with face amounts of at least $1 million, says McKeon.

Once individuals who aren’t suitable candidates are eliminated, Conning projects perhaps 2% of qualifying policies would remain as the target market. That would amount to about $188 billion of insurance in force, Conning estimates.


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