Two new reports from insurance asset manager, Conning – one of them produced in conjunction with life settlement industry group the European Life Settlement Association (ELSA), publisher of Longevity and Mortality Investor, paint an optimistic picture of the state of the life settlement market.
The 2025 ELSA–Conning Life Settlement Investor Sentiment Study is the sophomore edition of the report, which was first published last year; it is based on a survey of 252 investment executives (up from 155 last year), mainly asset managers and institutional investors, on their views about the asset class, both positive and negative.
As was the case last time, the report provides the life settlement market with plenty to chew on as it considers how best to shape its messaging going forward.
The good news for the industry is that there is plenty in the report for it to like. Investors were asked about what contributes to any positive views they have towards the asset class, and for the second year running, diversification (83%) and lack of correlation to broader financial markets (79%) were the top two answers.
“It’s clear that investors understand the main benefits that the life settlement asset class offers institutional portfolios, something it should take encouragement in. Particularly now, when financial markets are begging to diverge more than they have in recent years, assets such as life settlements that can provide diversification and low correlation – and, might I add, with lower volatility – make a strong case for an allocation,” said Manu Mazumdar, Head of Data Analytics & Insurance Technology at Conning, and author of the 2025 ELSA–Conning Life Settlement Investor Sentiment Study.
Other answers provide additional food for thought. Investors who had not previously invested in life settlements, whether they had considered them or not, were asked what they would need in order to do so; top of the list was transparency on fees (40%) and a close second was transparency on medical underwriting (36%). These two were further down the list in fourth and sixth place last year.
“That fee transparency is higher this year doesn’t surprise me too much – but I’d say that is a general trend in alternative investments, as opposed to being life settlement specific,” said Chris Conway, Managing Director with the Vitaro Group.
“But I’m pleased to see medical underwriting transparency higher up the list. What this tells me is that investors generally are getting a better idea of the importance of the medical underwriting function in the life settlement market. Given that longevity risk is the single greatest investment risk in our space, accurate life expectancy forecasts – which are driven by the medical underwriting process – should be top of mind for investors as part of their manager due diligence effort.”
Other roadblocks require navigating – some of which will be much more difficult than others. Investors were asked what aspects of the market contributed to any negative views they held about life settlements; performance history, at 71% of the respondents, came top. Solving for that will be difficult – no life settlement performance benchmark exists, at least, not publicly, so investors will need to continue to interact directly with asset managers (or through their consultant) to get up to date information.
Lack of liquidity is another, and limited market size another – although, as this magazine has mentioned numerous times, plenty of efforts are underway by both industry groups and individual companies to raise awareness, which, in turn, should boost activity.
The second report, Life Settlements: A Pause for Now is Conning’s 20th annual deep dive into some of the inner workings of the space, and one takeaway this year is that Conning expects the average aggregate size of new life settlement transactions to be $4.6bn per year through 2034 with the number of secondary market transactions reaching almost 3,500.
The latter figure would be a post-Global Financial Crisis record; industry magazine The Life Settlement Report tracks life settlement secondary market transactions and the highest number of transactions recorded since at least 2017 was 3,237 in 2020.
But 2024 delivered something of an activity setback, as 2,732 secondary market deals were completed last year, down 14.1% on the 3,181 the magazine reported in 2023.
Conning’s report acknowledges the blip but Scott Hawkins, Managing Director and Head of Insurance Research, and author of Life Settlements: A Pause for Now points to two tailwinds that support the firm’s view.
“The life settlement market may have paused in 2024, but the long-term forces driving growth remain intact,” he said.
“Investor interest in alternative assets is strong, and the emergence of a broader direct-to-consumer life settlement market is expanding access and awareness.”
The growth in the direct-to-consumer (DTC) segment of the life settlement market to which Hawkins refers is referenced again in this year’s report, as it was last year.
‘Life settlement providers are implementing mass market consumer advertising and direct-to-consumer settlement capabilities’, the impact of which is ‘Positive. The development of a life settlement mass market should increase consumer awareness and increase the number of policies settled’ says the report.
Conning’s report includes a discussion on how it is adjusting its forecast methodology to account for the emergence of a life settlement mass market; such is the potential impact of the growth of the DTC market on the overall space.
The report acknowledges the difficulty of incorporating a “known unknown” – in this case, the impact of greater consumer awareness – into the forecast but does so by adjusting the lapse rate. At a 5% increase, the model’s highest rate of change, increases the average market potential universe of policies available for sale from approximately $230bn in 2034 to approximately $390bn.
The reality is that not every US senior with a life insurance policy would be willing to sell it, of course. And not every policyholder who wants to sell meets the criteria required by an investor. So, Conning also estimates the net market potential, which, according to the report, would average $181bn per annum over the next ten years.
Given the life settlement secondary market currently transacts around $4-4.5bn per year and regularly references a perceived lack of awareness among policyholders as a headwind to growth, the bullish case becomes clear.
“The $4.5bn or so of secondary market transactions each year represents only 2.5% of the net market potential. Even if the space were to double current volumes, it would barely be making a dent in the overall opportunity. When you add the other tailwinds on the supply side – an aging population, and the need for long-term care funding sources – to the increasing search for alternative assets like life settlements that have low correlations to larger market movements on the demand side, and you see why we remain positive about the space in the long term,” said Hawkins.
The report also contains a section that delves into a topic that is, while evergreen, very much front and centre of the industry at the moment – that of carrier risk.
A life insurer that goes bust can’t pay the death benefit upon maturity, of course. And this risk has been very much in the news in the past 18 months with the rehabilitation of PHL Variable Life Insurance Company.
The latest and greatest is that the Connecticut Superior Court has approved the modification of the moratorium on certain benefit payments and transactions until the confirmation of a rehabilitation plan, which is due by the end of this year.
The bottom line is that any life settlement investors holding PHL universal life policies can pay less in premiums, as long as they also accept a reduced death benefit, or convert their policy to a claim for a fixed amount – undoubtedly much lower than the policy face value – and incur no further premium payments (or keep the status quo, which is to keep paying the full premiums in the hope that the $300,000 cap on payouts gets increased under the rehabilitation).
While there are eight firms that have submitted bids for all or parts of PHL, and “the rehabilitator continues to believe that a transaction has the potential to deliver at least as much, and possibly more, value to policyholders than would be received in a liquidation of the Companies”, it is likely that some investors will lose some money here.
But at the macro level, any overt concern about PHL could be a case of not seeing the wood for the trees. Conning’s report also looks at life settlement insurer performance, where it identifies 42 target insurance operating subsidiaries from 37 insurance groups that have issued policies held by life settlement investors.
The weighted average risk-based capital – a measure of an insurer’s financial strength developed by the National Association of Insurance Commissioners – for these 42 insurers was, at 463%, higher than the 434% for the weighted average life insurance industry, and both groups were significantly above the 200% authorized control level capital (the level at which a state regulator may consider taking action to address an insurer’s solvency risk). Indeed, every one of the 42 insurers held an RBC above 200% at the end of 2024, according to the report.
All life settlement eyes are now firmly fixed on Josh Hershman, the new interim PHL Rehabilitator, after Andrew Mais’ abrupt resignation at the end of last month. And, while the life settlement market may well be in “A Pause for Now”, for Hawkins, the bigger picture is one of robustness and opportunity.
“Again, the underlying structural features of the life settlement market are strong. You have a growing senior population, which is likely to mean more policies available to settle in the coming decade. And some of these people will need some kind of care, which incurs costs that a life settlement can help pay for,” he said.
“And then you have investors increasingly looking to alternative credit solutions like life settlements. There is plenty of opportunity for this market if it can solve the awareness conundrum.”