The Life Insurance Settlement Association (LISA), a Washington, DC-based trade association, unveiled its annual transaction data at its investor conference this past May 1st. Each spring, LISA surveys its life settlements provider members about the secondary market transactions that they participated in during the previous year; the members provide this data anonymously through a secure portal, which LISA then aggregates and publishes.
This is the second year LISA has collated market data to identify trends and benchmark market growth. And the headline is encouraging for the industry: some $789.6m was paid to consumers by LISA provider members (which LISA claims represent approximately 95% of the entire market) in 2022, an almost $40mn increase on the previous year.
“We’re delighted to see an increase in the dollar amount that our life settlement provider members paid to American seniors last year,” said Sherry Duarte, Chair at LISA. “The life settlement industry’s mission is to help educate consumers and advisors that just like any personal property, a life insurance policy is an asset that can be sold. The nearly $800m paid to consumers last year was spread across the United States, helping policy sellers pay down debt, go on vacation, help in their community, etc.”
The genesis of LISA’s efforts in this space was to highlight what it says are the benefits of the life settlement industry to consumers. Many in the life settlement market believe that too high of a percentage of the senior population in the United States are unaware that the option to sell their life insurance coverage for a lump sum cash payment even exists, and John Welcom, CEO at Welcome Funds, and the previous Chair at LISA who spearheaded this initiative, points to one of the data points to support LISA’s view.
“We still see far too many people either surrendering their policy back to the carrier for the surrender value, or worse, letting their policies lapse and getting nothing for them,” he said. “LISA’s provider members averaged a 5.2 multiple on the price they paid to consumers versus what would have been received from the life insurance company directly if they were to surrender their policy. That’s a significant financial benefit that our industry offers to seniors.”
There were 3,079 transactions completed by the 20 LISA provider members that contributed data to the report in 2022, a slight increase on the 2,998 recorded in 2021 when 23 providers participated in the project. A recent Life Risk News roundtable suggests numerous reasons for the apparent uptick in secondary market activity last year, including the relaxing of lockdown rules that enabled seniors to meet with their advisors, and a less risk-averse approach on the part of the insured. But the pickup in deal activity in 2022 may be less of a rebound and more of a sustainable medium-term trend. Reid Buerger, CEO at life settlements provider Coventry, said,
“The educational initiatives that our industry uses, including various forms of advertising, continue to prove effective. We’re seeing more and more submissions from consumers and financial intermediaries alike, eager to learn about their policies and understand their options and expect this trend to continue for the foreseeable future.”
The life settlement industry has historically been one of the opaquer asset classes within the wider alternative investment space. Indeed, the only other public source of secondary market transaction data is that provided by industry trade magazine The Life Settlement Report, part of The Deal, which collects data directly from insurance regulators at the state level; there is no publicly available data at all for the industry’s tertiary market. But Bryan Nicholson, Executive Director at LISA, says that initiatives like this will help the industry in terms of communicating both awareness and benefits.
“Any increase in the number of secondary market transactions means that the size of our market increases, and consequently, the aggregate dollar value paid to American seniors increases,” he said. “Our goal was to produce accurate market information that our industry could highlight in order to educate both advisors and consumers on the benefits of the life settlement option. We think LISA’s work here does that and we look forward to continuing this in the coming years.”
