Life Settlement Index sheds light on industry

The life settlement industry has long been admonished for its lack of transparency. Since the industry lacks a true centralized exchange transactional reporting and accurate data for the overall life settlement industry is anecdotal at best. Obviously some states such as Montana and Texas have reporting requirements for life settlement brokers and life settlement providers. However, the patchwork of state regulatory and statutory requirements falls well short of painting a complete picture of the life settlement market size or direction. Experts have volleyed a huge range of numbers when describing the actual and projected life settlement market size. Some have been speculating the life settlement market could reach $21 billion by 2012, while others have put future market potential at $60 billion or even as high as $120 billion.

Historically the life settlement industry has had few players which made estimating buying activity and market size easier. As life settlements have moved from a cottage industry to an established financial services sector the amount of participants has grown and so has the difficulty in accurately tracking the market size and direction. A decentralized industry devoid of a uniform tracking system, clearing mechanisms or well utilized centralized exchange makes fully understanding the scope and movement of the life settlement industry a very daunting task. Especially in times as dynamic and volatile as these are for the financial services industry. Ask 3 different life settlement providers what the life settlement industry is doing and which direction it is going and you are likely to get three different answers.

Companies such as Goldman Sachs and other investment funds have established quantitative measures for the industry but they don’t track market size or growth. For example, the Goldman Sachs life settlement index tracks a the mortality of a group of seniors. Their intent was to use this pool of lives as the basis for derivatives and synthetic life settlements. While some investment funds have based their fund products on a NAV or net account value of other life settlement participants. While these quantitative measures may serve their respective purposes well they do not answer the fundamental question asked by many policy sellers, life settlement brokers, life settlement providers and institutions. That being; What is the life settlement industry doing and where is it going? At the end of the day, this may be the most important bit of information about the life settlement industry itself.

Amrita Financial recognized the need to answer this question and developed the Amrita Life Settlement Index in Dec. 2009. The index is based upon surveys sent to life settlement providers operating in the United States. It asks 5 questions about current buying conditions and attitudes and one question about future expectations. The surveys which are collected the last 2 weeks of each month are then compiled and averaged to generate one monthly life settlement industry data point. These surveys in aggregate will go a long way in answering the questions, what is the industry doing now and what is it going to do in the future. The preceding month’s Amrita Life Settlement Index data point is released the first Tuesday of each following month. The index is a relative measure much like the CCI (Consumer Confidence Index). Therefore several monthly data points will produce a clear illustration of the market’s overall trends. The goal is provide a free resource that allows any interested party to obtain unbiased, unfiltered market data about the true life settlement market activity. We are very much looking forward to receiving the first iteration of surveys this month and continuing to look for new and innovative solutions to better serve the life settlement industry.