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Conning: Life Settlements Slumped in 2009

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The life settlements market was hit hard in 2009 by a major decline in investments in the market, according to a new study by Conning Research & Consulting.

Life settlement funds were choked off from buying new policies “by the retreat of investor capital through 2009, following both the financial crisis and market specific issues of the prior year,” says Scott Hawkins, an analyst at Conning, Hartford.

Conning estimates the face value of policies bought in the secondary market last year fell to $8 billion, down 36% from the 2008 total. It estimates cumulative in-force face amounts rose 16% in 2009. The cumulative increase was down by about half from the 2008 increase.

There was no decline in consumer demand for selling policies, Conning found, but a rather a drop in the amount of capital available for as potential investors became wary of longevity risk.

Much of the action in the life settlement market in 2009 involved the “tertiary market,” or sales of life settlement portfolios by one investor to another to resolve “earlier pricing errors,” Conning says.

“As we look to the future of this market, we believe that the life settlements market must make its case to investors, as it has done to policyholders,” Conning says.


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