The secondary market for life insurance policies expanded significantly last year, reaching a record high for the total value of policies involved in life settlement transactions, according to the Life Insurance Settlements Association.
Policies totaling around $12 billion in face value were sold on the secondary market in 2006, showing a continued sharp increase from prior years, LISA reports.
The group says it expects the market will continue to grow.
Although it set a record, the market in 2006 is “still a fraction of what some predict will be the size in 10 years,” LISA stated,
The group may have reasons to be confident in the continued growth of the industry. There is “greater interest from institutional investors” and more awareness among seniors of the life settlement option, says LISA executive director Doug Head. An example could be seen in the formation of an association of institutional life settlement investors in early 2007. The Institutional Life Markets Association, based in New York, includes Bear Stearns & Co. Inc.; Credit Suisse; Goldman, Sachs & Co.; Mizuho International P.L.C.; UBS AG; and WestLB AG. The group met for the first time March 22.
There are, however, continued challenges ahead for the secondary market, including a National Association of Insurance Commissioners viatical model act that LISA opposes as unfair to the industry and as limiting consumer choices. That model act, which the NAIC has approved, would restrict the ability of consumers to sell their policies for up to 5 years after purchase in some cases.