For a market segment where nothing much was happening not long ago, there sure seems to be a lot going on in the life settlement market right now.
A somewhat sensational article in the Sept. 6 New York Times, titled “Wall Street pursues profit in bundles of life insurance,” created a mini firestorm by revealing that Wall Street investment banks are planning to buy life settlement policies and “securitize” them by bundling hundreds or thousands together into bonds. Those bonds will then be resold to investors. While this development — which is still in the planning stages — could be a major boon for the industry, the fact that the Times article likened this process to being the next big money-maker for Wall Street after the sub-prime mortgage debacle didn’t do life settlements any favors. Widespread interest in the topic was evident in the several hundred reader comments to the article on the New York Times Web site.
The article prompted Doug Head, executive director of the Life Insurance Settlement Association, to respond with a letter to the editor that stressed the life settlement market is not about Wall Street, but rather “about providing older Americans with the opportunity to profit from an asset for which they have bought and paid,” Head said.
Then in mid-September, SEC chairman Mary Schapiro set up an internal task force to examine “emerging issues” in the life settlements market. Among issues to be studied are sales practices, privacy rights, disclosure issues and the role of securitization in the industry. In doing so, former FINRA head Schapiro made good on a promise to Sen. Herbert Kohl, D-Wis., chairman of the Senate Special Committee on Aging, that she would look into the life settlement industry. “There’s still so much we need to know about this burgeoning industry, and I’m grateful to the SEC for stepping up,” Kohl said. My hope is that the new task force will determine that greater regulation by the agency is necessary for life settlement providers and brokers.”
The life settlement market gets “main theme” treatment in this issue with a trio of features devoted to the current state of this still-emerging niche. We start off on page 22 with a market analysis provided by Life Policy Dynamics LLC, gleaned from a comprehensive bi-annual research report surveying trends and statistics in settlement transactions. Then on page 32 we have a legislative update from industry expert Larry Simon of Life Settlement Solutions Inc. Simon covers everything from STOLI developments to what’s happening in each state, plus recent tax rulings and proposals. We wrap up our coverage with Chuck Hirsch’s Producer Roundtable on page 39, where he questions four life settlements experts on the current business climate and how they have survived in the market through the recent capital freeze.
On a final note, the Life Insurance Selling family was very sad to learn of the passing of Irwin “Burt” Meisel on Aug. 8 at the age of 77 in Commerce Township, Mich. The longtime “Is this about insurance?” columnist was a treasured voice in the industry, and he is greatly missed.