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Life Settlement Market Needs Its Own Mortality Tables: Actuaries

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Two actuaries said in New York that the life settlement community really needs its own set of mortality tables.

Corwin Zass, the strategic director of Actuarial Risk Management, and Don Solow, the president of Vista Life & Casualty Reinsurance Company, both talked about the need for life settlement mortality tables at a Life Insurance Settlement Association conference for institutional investors.

(Related: Life Settlement Portfolios Did Something Weird in 2018)

For life settlement investors, one frustration has been that life expectancy forecasting firms often come up with wildly different life expectancy forecasts.

John Welcom, the chief executive officer of Welcome Funds Inc., a life settlement brokerage firm, said his firm might ask several firms for life expectancy forecasts for the same insured and get back estimates ranging from 42 months to more than 130 months.

Zass that’s partly because accurately predicting the lifespan of one individual is impossible.

Under good conditions, a firm may be able to provide a reasonably accurate, precise forecast for a large group of insureds, but it will always have a hard time providing that level of precision for one individual, Zass said.

Solow also emphasized the difficulty of predicting the lifespan of a single individual.

Zass and Solow also suggested that mortality tables aimed at life insurers are based on a much different population than the population of the older, sicker insureds who make good candidates for life settlement transactions.

Zass said he would like to see more transparency in life expectancy forecasting in general, with firms at least trying to provide what they are think the boundaries for the conditions under which they think 50% of the outcomes are likely to occur, not just the midpoint.

Both Zass and Solow said the life settlement community needs tables based specifically on people offering policies through the life settlement market.

Solow said he would like to see data broken out separately for people who offer policies to life settlement provides and people who actually get policies sold to life settlement policies, who may be somewhat different.

“The question is whether you can really gather up all the data,” Solow said, citing life settlement companies’ incentive to keep their data to themselves.

— Read 5 Life Settlements That Didn’t Get Awayon ThinkAdvisor.

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