A recent report from insurance asset manager Conning and the European Life Settlement Association (ELSA, publisher of Longevity and Mortality Investor) details the findings of a survey that posed a series of questions to institutional investors regarding their views of, participation in, and experience of, the life settlement market.
One of the findings was that investors “increasingly position life settlements within their “resilience bucket,” alongside private credit, infrastructure, and real assets, as a defensive yet productive counterbalance to volatility in public markets”.
Life settlements defy easy categorisation. While they offer the defined payout characteristic of fixed income, they also carry the valuation complexities of private market assets, where the underlying value fluctuates based on shifting life expectancy estimates and discount rates.
For many institutional investors, ‘resilience’ is synonymous with the credit markets, but resilience in a portfolio doesn’t always have to wear the guise of a loan. According to Manu Mazumdar, Head of Data Analytics & Insurance Technology at Conning and author of the study, the asset class offers a distinct alternative.
“There are a few clear reasons why investors see life settlements as a resilience allocation. First, life settlements offer true return independence – their cash flows are driven by human longevity, not interest rates, credit spreads, or equity markets. In today’s environment, where virtually every asset class seems tied to macro volatility, that non‑correlation seems to be incredibly valuable,” he said.
“Second, the diversification benefit is real and consistently cited in our survey. In fact, diversification was the number‑one reason investors said they allocate to life settlements. When institutions are under pressure to build portfolios that can weather different economic regimes, assets that reduce correlation and smooth volatility naturally get classified as resilience‑enhancing.”
Traditional diversification strategies often lead investors toward private credit strategies such as direct lending. While these offer a different risk profile than equity, both remain tethered to the same fundamental driver: corporate performance. Whether you hold the debt or the equity, the investment’s success is ultimately sensitive to interest rates, consumer demand, and the broader macroeconomic cycle. Over-allocating to traditional credit assets can inadvertently create a portfolio that is “over-correlated” to the health of the wider economy.
Actuarial assets such as life settlements offer investors something else. At first glance, the mechanics differ significantly from standard credit; they are negative carry assets that require premium payments upfront in exchange for a terminal payout. But the perceived volatility of these ‘binary’ events is mitigated by the application of actuarial modelling. When managed at scale, the lumpy nature of individual policy payouts transforms into a more predictable stream of returns.
This can make life settlements a “diversifier within diversifiers.” Unlike corporate private credit, the primary risk isn’t an economic downturn, but mortality, which operates independently of the stock market or GDP growth. Applying actuarial science to an asset class means that investors can achieve a level of cash-flow stability that rivals traditional credit, but without the traditional macro sensitivities – providing that the quality of the combined underwriting and actuarial expertise is of a good enough standard.
“Actuarial science allows us to quantify risk and variability in a disciplined way by analysing mortality patterns and their financial consequences. In life settlements, that means we can model portfolio cash flows with a high degree of confidence once there is sufficient scale. Diversification across enough policies tends to smooth individual outcomes, making aggregate cash flows relatively stable. That said, this resilience ultimately depends on the quality of the underlying mortality assumptions; without well-calibrated assumptions, even a large portfolio can produce misleading projections,” said Liam Bodemeaid, Founder & Principal Actuarial Consultant at Paragon Longevity Analytics.
The question of where life settlements should find a home in institutional portfolios is important for the industry because proper classification determines, in part, how value is perceived; until it is recognised as a fundamental pillar of resilience, the asset class is unlikely to attract the scale of capital its peers currently do. Proving it can fulfil a permanent, strategic role moves it past ‘opportunistic’ status and into the mainstream.
What the industry is likely encouraged about is that some kind of consensus seems to be emerging. Those active in the market have long argued that (much) more investor education is needed in order to get those less familiar with the space to even walk up to the door, let alone go through it, and Patrick McAdams, Investment Manager at SL Investment Management, says that the efforts are paying off.
“It is of course important for our market that investors not only understand where we fit, but why,” he said.
“And we’re seeing that ourselves when having conversations in the market. It’s noticeable that the ‘knowledge floor’ has risen in recent years, although, it needs to keep rising.”
Raising that floor will require continued effort. Life settlements are arguably more complicated assets than vanilla private credit because the maturity date of the asset is a variable, rather than a contractual certainty. This introduces a layer of volatility driven by medical advances and discount rates, requiring a level of specialised due diligence that often goes beyond the credit analysis applied to a mid-market loan, for example.
But the space seems up for it – the ELSA-Conning report was commissioned to take the temperature of sophisticated investors and asset managers, and as the report is now in its second year, the industry can begin to identify trends, both good and less so, that it might want to support or push back against.
But, for Mazumdar, the work is just beginning.
“Our survey shows that investors are at very different stages of understanding. Some absolutely ‘get it,’ and others still need education before they can engage in the portfolio‑fit discussion. Portfolio fit remains an important narrative — but for a sizable portion of the market, the educational priority should still be foundational,” he said.
“Clearer data, more transparency, and more accessible education will help bring new investors to the point where the diversification story resonates. Once those pieces are in place, the ‘where does it fit?’ conversation becomes far more productive and more aligned with what experienced investors already understand.”
