As the life settlement industry has matured, companies are beginning to see the need to keep their eyes open for problems stemming from the earlier days of the industry to the potential challenges lying in the road ahead.
One of the challenges discussed at the Life Insurance Settlement Association’s spring conference here was the issue of distressed portfolios that have come into the market as those investors holding them have been unable to bear the financial burden of doing so.
Speaking at the conference, a panel of experts discussed the unique challenges that are involved with the purchase of a distressed portfolio, and what companies can do to minimize their risk when acquiring them.
Of course, part of addressing the problems of buying distressed portfolios is recognizing that those problems are different for each transaction, noted Sheri Townsend, a managing member at Asset Servicing Group.
“When you go in the door, every one is unique,” she said, adding that each transaction is a “whole different situation, with a whole different set of problems.”
Some problems, however, are more common than others, and Townsend noted that in many instances, the buyer of a distressed portfolio often faces a problem with policy data, or the lack thereof.
“When you go in, there should an existing database” of the policies included in a portfolio such as when premiums are due and how much is owed, she said. However, she added, in many cases no database exists. She said she has at times found herself among “literally conference rooms full of documents” sorting through files.
“It’s really difficult to go to the hard files” for information, she said. Hard files, she added, may also differ from one another or be incomplete. “You may not have all the data you are used to” when evaluating a portfolio.