The landscape of licensed life settlement providers is largely unchanged this year, according to new data published by the European Life Settlement Association (publisher of Life Risk News).
The organisation is out with an update to its Licensed Provider Matrix (LPM), which it originally published as part of a ‘fact sheet’ in December last year. The LPM lists the licensed life settlement providers active in the industry, and the states in which they are licensed to operate.
In 2024, there is a net reduction of the total number of licenses of seven, a statistically insignificant 0.85% contraction from the 707 licenses that ELSA identified when it conducted the exercise last year.
The data suggests a reasonably settled market for these firms.
“The size of the licensed provider market in the life settlement industry was very similar this year to last year, with few comings and goings,” said Chris Wells, Executive Director at ELSA.
“That consistency is a benefit to our industry, and for investors, the takeaway should be that the asset managers they entrust with their capital are investing in a market where there are plenty of providers to work with, which in turn keeps pricing keen. Healthy competition at the provider level means asset managers should not be overpaying for policies, which increases the chances they will be delivering higher returns for their clients,” he added.
The number of firms in the LPM remained at 38; one new entrant, LifeBridge Legacy, secured a license in Indiana this year, and one firm, X-Group Retirement, no longer holds any licenses (it was licensed in Texas last year).
The process of becoming licensed as a life settlement provider can hardly be described as straightforward. First, the fact that insurance is life settlements are regulated at the state level means that any firm wishing to become licensed will have to go through the process a maximum of 44 times (if you include Puerto Rico, which regulates life settlements). New Mexico regulates viatical settlements and Michigan has a viatical settlement law on its books but does not require licensure to purchase a policy; none of Alabama, Missouri, South Carolina, South Dakota, Wyoming or the District of Columbia regulates the market.
Each state that maintains a regulatory regime for the secondary market typically uses either an iteration of the NCOIL Model Act, or the NAIC Viatical Settlements Model Act, or a combination of both, as their model, which requires applicants to tailor their application each time. The time that it takes to become licensed varies wildly from state to state; it has been known to take more than a year in some cases.
“The process of becoming licensed as a provider is much more onerous than most people and companies that are newer to the space think it is,” said James W. Maxson, Partner at EM3 Law.
“You’re dealing with a very involved statutory schema. The information required on the application is different in every state. Most require an NAIC Biographical Affidavit, some require a third-party affidavit, some require fingerprinting, some require audited financials, and all require a plan of operations and anti-fraud plans. A lot of work goes into it and rarely do two states ask for identical information.”
Additionally, the process has changed in recent years, which has impacted the timescales involved in licensing.
“The one thing that is uniform in the process is that in every state, becoming licensed is a two-step situation. First, the application is approved, and then the contracts that the provider wishes to use are approved.
“Previously, both documents frequently could be filed at the same time, but now, in virtually all states the latter is filed after the former, because of the SERFF (System for Electronic Rates and Forms Filing) system that is now required for filing and approval of forms has been adopted in almost all of the states that regulate life settlements,” added Maxson.
Last year, only four firms were licensed in 40 or more states: Abacus Settlements, Coventry First, Life Equity and Maple Life Financial. This year, those same four firms occupy the top four slots; in every state, there is at least one licensed life settlement provider where a license is required.
“Consumer choice is a critical component of the success of any market, and it is encouraging that the American Senior has options in all states that have an established regulatory regime,” said Bryan Nicholson, Executive Director at industry group, Life Insurance Settlement Association.
In terms of activity, the life settlement provider market, like most others, has larger players and smaller ones. Trade publication The Life Settlement Report, part of The Deal, publishes an annual ‘league table’ of secondary market transactions in late spring or early summer each year, with data from the prior calendar year sourced by public records requests from state insurance departments.
In 2023, 3,181 transactions were concluded by 24 providers, but the top six firms (in terms of activity) accounted for 2,728 of those, or 86%. In 2022, 3,057 transactions were completed, and the top six accounted for 2,512, or 82%. In 2021, 2,938 deals got done, and the top six firms did 2,277 of those, or 77%.
Last year saw the first reduction in the number of providers completing a transaction since at least 2017. The Life Settlement Report’s data shows 23 providers doing at least one deal in 2017, with 27 firms doing so in each of 2022, 2021, 2020 and 2019. Last year saw a pull back to 23 firms, but for Nicholson, the message remains.
“The number of secondary market transactions is growing, as is the awareness among the population generally. Our industry has many excellent quality providers transacting in the market, with good coverage across the country, which means choice for the American Senior when looking to sell their life insurance policy,” he said.
