Unlike the secondary market, where annual ‘league tables’ of data relating to life settlement transactions are available, the tertiary life settlement market, where blocks of life insurance policies trade bilaterally between investors, provides little in the way of publicly available data, an opacity that provides challenges to investors looking to understand recent and current trends in the space.
But what is generally accepted is that the aggregate face value transacted in the tertiary space each year is often greater than the approximately $4bn seen annually in the secondary market, as transacted blocks can contain policies that entered the market up to a decade earlier, sometimes more, than those in the secondary market.
Whether that holds true for 2026 remains to be seen. But what is clearer is that at the start of this year, however, the focus of the life settlement market would seem to have been squarely on the secondary market.
“I have definitely seen fewer blocks of policies in the tertiary market this year,” said Jim Maxson, Partner at EM3 Law.
“Much of the industry seems to have shifted to focusing on the secondary market recently. The big providers seem to be acquiring more and more market share, and the trend where vertically integrated asset managers and providers are keeping policies for their own books would seem to be contributing to lower levels of activity in the tertiary market.”
The life settlement market, like other alternative asset classes, saw fundraising retreat in 2022 and 2023, which arguably goes some way to contributing to the fall in secondary market activity – transaction counts fell roughly 14% versus 2023 – in 2024.
While secondary market activity resumed its upwards trajectory last year, secondary market bumps in the road tend to be supportive of demand in the tertiary market, as investors with capital that they need to deploy look to the space to add to their existing portfolios or reconstruct their portfolios (or both).
Indeed, the demand is there, apparently, which makes the malaise observed at the beginning of the year very much a supply-driven one.
“When fewer newly originated policies come through the secondary market, buyers who still have capital to deploy have to source elsewhere, and the tertiary market is where they go. But the bigger story, though, is the imbalance between the two sides of the trade. Right now, there is more capital looking to buy than there is product coming to market,” said Martin Kramer, New Business Development Manager, Life Settlements at Longevity Holdings.
The market will be hoping that supply can rise to meet demand to deliver a more active market equilibrium. After all, asset managers can only sit on un-deployed dry powder for so long, so a slow first quarter puts pressure on investment committees to play catch-up in the latter half of the year.
Kramer thinks it will – because he is already seeing evidence of a turning of the tide.
“Yes, there are more buyers sitting on committed capital than there are quality policies and portfolios changing hands, so the bottleneck has been on the sell side, but that is starting to shift,” he said.
“We’re seeing more blocks and individual policies come to market than we were earlier in the year, and as that inventory loosens, we expect a very active tertiary market.”
Another benefit to a healthy demand and supply trade-off that overpaying for deals is a less frequent occurrence. Sometimes, too much capital chasing too few opportunities leads to higher prices for deals, and therefore, a lower return, but despite the abundance of capital and the relative scarcity of tertiary paper, that hasn’t transpired in the life settlement tertiary market – at least, not yet. Price discipline seems to be healthy in the market so far, a good news story for investors.
“On pricing, we’d call the market rational rather than frothy. Buyers are disciplined but engaged, and valuations haven’t run to a point where deals stop making sense. That’s a healthy backdrop for a trading desk: real competition for the right assets without the overheating that makes transactions hard to close,” said Kramer.
Predicting the trajectory of the tertiary market for the remainder of the year is difficult. Traditionally, the closing months of any calendar year inject a natural urgency into transaction-oriented alternative asset classes – private equity, private debt, real estate – as institutional investors face looming deadlines to deploy capital allocations, while sellers look to clean up their balance sheets or lock in gains before the year-end books close.
But while that didn’t happen in the life settlement tertiary market last year, Kramer says that all signs point towards better news this time around.
“We expect activity to pick up. Last year the back half slowed, and we don’t see that repeating. There is additional capital scheduled for deployment later this year, demand is already outrunning supply, and more product is starting to reach the market. Our base case is that the desk stays busy through year-end, with the second half at least matching the Q2 pace, and quite possibly, exceeding it.”
