The question was: Some of my life settlement clients are concerned by the idea that their life policy may be purchased by an overseas interest. They say they would “feel better” having a U.S. buyer. How can I respond effectively to this concern?
The answer is: In order to purchase an insurance policy in most states, the buyer must work through a life settlement provider licensed or authorized by the state department of insurance. So technically, in order for your client to sell their policy, the transaction will be through a U.S.-based provider. However, foreign-based institutional investors today fund most providers.
There is a valid reason for this transition to mainly foreign purchasers. The issue deals with taxes. Many funds that buy life settlement policies are forming “funds” that are registered in such jurisdictions as Ireland and Luxembourg and have many U.S. institutional investors and favorable tax treaties with the U.S.