Conning--Life Settlements: Weak Investor Supply Despite Growing Consumer Demand

While consumer demand for life settlements remains strong, capital inflows remained weak in 2011, according to a new study by Conning.

"The life settlement market volumes remained low in 2011, reflecting weak capital inflows continuing as in the past few years. This in part due to investor concerns with standards of underwriting and pricing accuracy," said Scott Hawkins, analyst at Conning. "In fact, because of fewer new policies settled, we estimate that the amount of in-force life settlements actually declined for the first time in 2011 based on death claims and lapses on previously settled policies. While consumer demand for this product remains strong, the asset class has so far been unable to attract sufficient capital to meet that demand. Activity in the market has mainly centered on acquiring distressed portfolios rather than funding new policy purchases. But we may be seeing early signs of change."

The Conning study, "Life Settlements: Weak Investor Supply Despite Growing Consumer Demand" provides Conning's annual Life Settlements Market Review and Forecast, along with market guidance and lessons learned for new investors. This is the ninth study of this market published by Conning.

"In our view, the future of life settlements as an asset class seems to be contingent on developing stronger market structures and confirming pricing accuracy for potential investors," said Stephan Christiansen, director of research at Conning. "Yet the life settlements asset class continues to hold interest for investors struggling with today's low interest rate environment, and work is underway to restructure and to increase attractiveness to investors. In fact, in 2012 we are beginning to see early signs of renewed investor interest and commitment in the class for the first time since the financial crisis."