2013: Life Settlements - A New Opportunity in Smaller Policies
Conning’s annual study on Life Settlements reviews the market and looks ahead at the challenges and opportunities it faces. Presented are both current market conditions and Conning’s forecast of how the life settlement market may develop over the medium term. This study also looks at a new market opportunity in providing funding solutions for long-term care. The long-term care market opportunity and its impact on life settlement investors is analyzed.
2. Executive Summary
3. Market Review and Forecast
- Life Settlement Market Review
- Conning’s Life Settlement Market Forecast
- Growing Demand for Long-Term Care Funding Sources
- A State Encouraged Nursing Home Opportunity
- The Assisted Living Care Funding Opportunity
5. The Long-Term Care Impact on Life Settlements
- A Positive Impact on Longevity Risk
- Potentially Reduced Liquidity Risk
- Challenges in the Long-Term Care Market
- A More Complex Life Settlement Process
6. Sizing the Life Settlement LTC Funding Opportunity
- Sizing the Nursing Home Funding Opportunity
- Older Americans Own a Sizable Pool of Policies
- A State Specific Distribution Opportunity
- Reaching the Customers
As an asset class, life settlements continued to struggle to attract new capital in 2012. As 2013 developed, some indications of renewed interest in life settlements among investors surfaced. This renewal was driven in part by the prolonged low interest rate environment. At the same time, a new market opportunity emerged in the form of long-term care funding opportunities.
Looking at the 2012 and 2013 life settlement market, we see an asset class where consumer demand remains strong. However, weak capital inflows are hindering the ability to meet consumer demand. As life settlements enter 2014, and beyond, will the new market opportunity and continued low interest rate environment combine to reignite investor interest and help meet consumer demand?
This study reviews the life settlement market and looks ahead at the challenges and opportunities it faces.
- We review the current market and provide our forecast of how the life settlement market may develop over the medium term.
- We analyze a new market opportunity in providing funding solutions for long-term care.
- We size the long-term care market opportunity and its impact on life settlement investors.
A History of Life Settlement Research
Conning has followed the development of the life settlement market since 1999 because it represents the convergence of several themes we believe confront the broader life insurance industry. First, policyholders increasingly demand products and services that provide consumer flexibility. The life settlement market response has been to meet these demands. This increasing consumer optionality creates a second theme, an accompanying increase in the level of risk in accurately pricing products. Finally, life settlements represent the continuation of third-party providers assisting and influencing policyholder behavior, without concern for the best interest of the insurer.