The market for life settlements today is about US$12 billion to $15 billion annually, with total in-force life settlements of over $80 billion—a number Michaelson expects to rise to $180 billion. Of the $23 trillion of life insurance in force in the U.S., $800 billion covers seniors who are over 65, but not all policies have a value greater than their cash surrender value.
As boomers enter into their retirement years, he sees them using life settlements as a financial planning tool—to fund their retirement years.
For investors, life settlements “offer an attractive risk-adjusted return that is uncorrelated with the performance of other financial markets.”
Another advantage of life settlements is certainty of payout. No life insurer has failed to pay a death benefit. “It not a matter of if you will get paid, it’s a matter of when you’ll get paid.”
By the same token, however, Granieri warns, “if you need liquidity, this is not an asset class for you.”
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