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Top Life Settlement Headlines of 2010
The life settlement world has seen an interesting 2010. As it comes to a close, some of this year’s events can be viewed not only as a barometer of the industry throughout the year, but also as a significant indicators of its future. Below are the ten biggest life settlement stories of 2010, in no particular order.
1) $100 million life settlement fraud case cracked. While fraud has been linked to life settlement investments in the past, the sheer size and scope of this case is hard to ignore. It features an 18-count indictment for [the] alleged roles in a $100 million fraud scheme with more than 800 victims across the United States and Canada.” Unfortunately, allegations of fraud continues to shape the perceptions held by consumers, regulators and investors alike.
2)SEC report suggests life settlements be defined as securities. The SEC's Life Settlements Task Force recommended that the Commission "consider recommending to Congress that it amend the definition of security under the federal securities laws to include life settlements as securities." Changing federal securities laws in this way would force life settlement intermediaries under the SEC's authority and necessitate FINRA registration.
3)Zang v. Alliance Financial Services of Illinois, Ltd. In September, an Illinois court made a much talked about decision when it ruled that in essence, life settlements are not securities when only a single investor is involved. However, as renowned life settlement legal expert, Brian Casey pointed out, “[industry participants] should limit [their] enthusiasm for the ruling until additional courts have had the opportunity to adjudicate similar issues with fact patterns not as unusual as those set forth in Zang.”
4) LISA leadership change. After stewarding the Life Insurance Settlement Association (LISA) since 2001, Doug Head announces he will retire as executive director at the end of this year. Darwin Bayston, who has experience as a consultant with AVS Underwriting, and his own firm Life Settlement Consulting & Management, steps into the position at a time of enormous market and regulatory changes.
5)Invescor closes doors. A leading life settlement broker with strong ties to the broker dealer community cites slow market volume and a difficult selling environment as reason for shuttering business.
6) State regulation takes effect across the country. California, New York, Illinois, NH, Oregon, Rhode Island, Vermont and Wisconsin all saw new legislation take effect during 2010. While the new laws were expected, the legislation has changed compliance and disclosure practices in major markets such as CA, NY and IL.
7)Life Expectancy Providers form focus group."Advanced Underwriting Solutions, AVS Underwriting, Examination Management Services, Inc., ISC Services and 21st Services form group to provide a comprehensive and consistent set of best practices and performance standards to all longevity markets that may benefit from life expectancy and mortality information." The goal is to present this information to the various life settlement trade associations for acceptance and adoption. Noticeably absent from the focus group was Fasano Associates.
8) Goldman Sachs exits the life settlement industry by closing Longmore Capital. Goldman Sachs was not the only investment bank which exited the industry or significantly downsized its footprint in the life settlement space during 2010. However, its departure may have been the most prominent due to Goldman’s broad activity in various capacities across the industry.
9)Fortress Investment Group agrees to purchase a multi-billion portfolio of life settlement policies from KBC Bank, N.V.. Fortress Investment Group, a noted hedge fund, signals confidence in life settlement market by purchasing a $6.2 billion portfolio of life insurance policies. While the portfolio was distressed, the acquisition nonetheless is a meaningful demonstration of new confidence in the life settlement market and a firm commitment of significant capital.
10)Life Settlement Provider begins requiring paramedical exam for life settlement transactions. This change, if adopted by more providers and investors, has the potential to fundamentally change the life settlement paradigm. It raises a number of questions moving forward such as; How important will life expectancy providers be? Do exams give additional confidence to investors? How will the transaction change? Or even; Will this dissuade some insureds from participating in life settlements?
2010 has been a dynamic year for the broader financial services sector, but acute forces have greatly affected the life settlement industry. Bullish and bearish sentiment have influenced market activity in a short span, while regulators and investors have attempted to adapt to the changing environment.
Looking ahead, it is difficult to predict what the life settlement industry will be like in 2011. However, it is safe to say the changes we saw this year will have a lasting impact for the foreseeable future.
Read more: Technorati