Life Settlement Predictions For 2011

As 2010 draws to a close and the dawn of a new year beckons, those in the life settlement industry look forward with renewed optimism. By most accounts, the life settlement industry's bottom is behind us and the secondary life insurance market is now in the process of recovering. How much and how fast is still to be determined. However, below are the Top 10 Predictions For Life Settlements in 2011.

1) Secondary Market To See Increased Buying. As everyone knows, capital has been slowly reentering the market but it is still off the highs experienced prior to the Great Recession. Much of the activity in 2010 was focused on tertiary trades and investors looking for distressed policies or portfolios. As those opportunities become less available in 2011, capital will be redirected to secondary market activities and policy origination.

2) Private Equity Will Arrive: As the investment banks and other types of investors left the market in 2009 and 2010, everyone has been anxious to identify the next big player. Much attention has been paid to Private Equity and in 2011 it will arrive. Rumors have been swirling that PEG's have been looking for acquisitions of established market players and have recently started funding some providers.

3) Small investors will make a splash: Many have been waiting for institutional investors to flood the life settlement market with capital, while forgetting that high net worth individuals and family offices in aggregate have the potential to play a serious role. With an eye towards diversification and predictable returns, expect accredited investors and family offices to be active buyers, as never before, in 2011.

4) Higher Life Settlement Broker Utilization In the past, it has been relatively easy for producers to act as de facto life settlement brokers. However, new industry best practices suggest life settlement brokers are preferred as intermediaries for policy owners interested in selling their policy. Not only are brokers more able to source small pockets of capital, but more stringent licensing, regulatory and compliance requirements make it difficult for anyone but brokers to effectively navigate the landscape. 2011 will see producers more likely to refer cases to brokers than try to handle them autonomously as they may have in the past.

5) Continued Push Towards Regulation While approximately 20% of the states remain unregulated, the writing is on the wall that change is imminent. Some of the key unregulated states already have legislation in the works and consumer protection is a hot button issue that resonates with legislators. Expect the trend of consumer friendly life settlement regulation to continue in 2011.

6) Agents and Advisors Will Have To Address Life Settlements Like Never Before In 2011 expect numerous states to adopt the new NCOIL model act requiring carriers to notify consumers of the life settlement option when policies are to be surrendered or allowed to lapse. Agents and financial advisors that previously didn't consider settlements in their practices will now be forced to address the issue as carriers drive policy holders with questions and inquiries to those on the insurance front lines.

7) Greater Focus On Information Security For too long, sensitive insured and policy owner information has been transmitted between agents, brokers and providers using insecure methods such as email. In 2011, as industry best practices demand secure data transfer, expect much higher utilization of specialized life settlement software such as Settlewerx and others.

8) Smaller Providers While the big players aren't going anywhere, expect the trend of boutique providers serving smaller pockets of money and niche investors to continue into 2011.

9) Asian Investment US and European investors are the stalwarts of US life settlement investments. In 2011, expect to see more capital coming from Asia and the Middle East, which are relatively untapped sources of investment capital. Newly established offices and initiatives in that part of the world should begin to produce new funding sources in the coming year.

10) Broader Buying Parameters While cherry picking great policies at a discount was the name of the game in 2010, expect 2011 to bring a broader approach to buying. With increasing competition for policies, buyers will have to consider cases that might not have otherwise received bids in 2010.

With the broader economy improving and capital returning to the markets, 2011 promises to be an improved life settlement environment. For those that were able to survive the past two tumultuous years, they will hopefully be rewarded with a fruitful 2011.

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