ELSA’s Master Agreement for Tertiary Transactions (MATT) was first published in 2019. Life Risk News’ Greg Winterton caught up with Philip Siller, Executive Chair and Co-CEO at BroadRiver Asset Management, to discuss the origins of the document and its most salient points.
GW: Philip, BroadRiver, in its capacity as an ELSA member, was one of the firms involved in drafting the MATT in the first place. Why did ELSA and BroadRiver feel that some kind of standardised document was important for players in the life settlement’s tertiary market?
PS: Standard documentation for recurring transactions is a critical tool for an efficient market. It saves time and it saves money. ISDA documentation for the derivative market and standardized mortgage and security agreements in the real estate and UCC markets are examples. We, and others, saw a similar need for tertiary life settlement transactions and BroadRiver’s general counsel led the working group that developed the MATT.
GW: Prior to the invention of the MATT, investors would have had different agreements with different counterparties. How easy has it been to evolve away from that model to a single, industry-wide model, and does the MATT provide enough flexibility when dealing with counterparties with different requirements?
PS: The transition to standardized documentation was surprisingly smooth, which was an endorsement of the care and objectivity of the working group. In my experience, the portions of contracts that eat up the most drafting time are not the business terms, but the allocation of risk terms. By focusing on an objective analysis of the allocation of risk – knowing that the members of the working group might be buyers one day and sellers the next – the working group drafted terms that followed the logic of a tertiary transaction. Almost immediately, the MATT was adopted by market actors.
GW: Are there any knock-on advantages to using the MATT after the initial tertiary market transaction has been completed?
PS: As the industry became more comfortable with the MATT, we discovered that post-closing issues could be resolved with less tension between the parties. Everyone understood that interpretations of the MATT that they were advancing as a buyer in one transaction would be read back to them next time when they were sellers. So, resolution of unexpected transaction glitches have gone smoother.
GW: The MATT is a good example of standardisation in the life settlement market. Are there any other areas of the market, aside from transactions in the tertiary market, where you would like to see new or better standardisation?
PS: My Co-CEO, Andrew Plevin and I started BroadRiver’s predecessor twenty years ago with the express purpose of attracting institutional investors to our funds. At that time, there was no consistency across provider documentation concerning even the most basic aspects of life settlements transactions, such as transfer of title and the role of providers versus funders. Broker/consumer contracts also took many forms. And, there were few law firms with expertise in the area.
We understood that institutional investors could not transact in that environment. So, along with some of the institutions themselves (and Coventry, in particular), we worked to promote regulation to protect consumers and standardize transaction terms. At this point, there isn’t much more to do. The industry is well-regulated and contract terms are rarely a source of concern or delay in either the secondary or the tertiary markets.
GW: Lastly, Philip, what tends to be the reaction of investors – your clients – when you discuss the MATT with them? I assume they’re pleased that firms like BroadRiver are attempting to usher the industry towards a more standardised, transparent transaction framework?
PS: That’s correct. Our clients are diligent in understanding the execution risk around life settlement transactions. Earlier in the history of this asset class, this was an issue. It isn’t anymore.
Philip Siller is Executive Chair and Co-CEO at BroadRiver Asset Management, L.P.