The average in-force life insurance policy sold in 2008 was a little smaller than the average policy sold in 2007.

The average face value of a policy sold through a life settlement agreement dropped to $2.3 million, from about $2.4 million, according to Life Policy Dynamics L.L.C., Washington. But the average value was up from $1.9 million in 2006, the firm reports.

The firm is basing its figures on a review of about 1,000 settlements representing $2.3 billion in policy face value and $521 million in buyer payments.

The firm found that the percentage of settlement agreements involving “middle segment” policies – policies with $1 million to $5 million in face value – increased to 54% in 2008, from 45% the year before. The share of transactions involving upper-end policies, or policies with face values of $5 million or higher, fell to 15%, from 20%. The share of settlement volume involving policies with face values under $500,000 fell to 13% of the total, from 17%.

The likely reason for the drop in the share of deals involving upper-end policies was the effect of economic conditions on the amount of capital available, Life Policy Dynamics says.

Life insurance policies originally issued in New York state accounted for 24% of all cases settled in 2008, while California policies accounted for 18% of settlement volume. New York and California have no life settlement laws, and that may be one reason they are the dominant issuing states in the market, Life Policy Dynamics says.