The U.S. life-settlement market, in which investors buy life-insurance policies to collect benefits, declined last year as hedge funds and private equity firms had less capital to spend amid a recession, a research firm said.
Policies sold by insured individuals in 2009 had a face value of about $8 billion, a decrease of 36 percent from a year earlier, Conning & Co. said today in a statement.
“During 2009, a significant decrease in investor capital reduced the ability of life-settlement funds to purchase new policies,” Scott Hawkins, an analyst for Hartford, Connecticut- based Conning, said in the statement.
About $35 billion of U.S. life settlements were in force at the end of last year, up 16 percent from 2008, Conning said. Investors pay the premiums after buying the policies, and make money if the remaining costs are less than the final payout when the seller dies.
Conning said the industry was hampered also by new methods for calculating life expectancy. Underwriters made the changes in late 2008 and early 2009, extending average estimates for life expectancy and creating uncertainty about the accuracy of earlier contracts.
“First there was the economic turmoil that dried up some investor wealth,” Hawkins said in an interview. “That was compounded by concerns about the accuracy of life expectancies.
Apollo Global Management LLC, the private-equity firm founded by Leon Black, was bidding on $6 billion of life- insurance policies held by Belgian bank KBC Groep NV, two people with knowledge of the talks said this month.
Life settlements are being sold at “distressed pricing” on the secondary market, according to a document included in a presentation by the Oregon Investment Council, a state pension plan, on Sept. 29. Regulators in Europe are encouraging banks to divest their non-core assets, the pension fund said. To read the full article, please visit BusinessWeek
Blog Archive
