Life Settlement Executives comment on WSJ Article
David Mickelson, head of David Mickelson Insurance Services, Oceanside, Cal., says he found that the article may have “overplayed its hand” by comparing life settlement securitization to the mortgage meltdown.
“If you read it from the point of view of, ‘Oh no, here we go again,’ you could get the impression settlements are bad,” Mickelson says.
Mickelson believes there are a number of fundamental distinctions between mortgage securitization and life settlement bonds.
For one, agencies ranking settlement risks are quite conservative, and the underlying assets are individually far more secure than are mortgages.
“You might have a securitization of 500 policies, but each policy has the backing of an insurance institution with a rating no lower than AA,” he says. “And the insurance industry has a perfect record of always paying death claims.”
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Andrew Calhoun, president and chief executive officer of Pacific West Capital Group, Los Angeles, says of the Times article that he’s glad to see the growth potential of the industry is finally being recognized. He also questions, however, the analogy the article makes between settlements and mortgage-backed securities.
“If consumers quit paying their mortgage, it can lead to a meltdown in the economy,” he says. “That would be impossible in this industry, because no one can avoid death.”
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Rob Haynie, managing partner, Life Insurance Settlements Inc., Fort Lauderdale, Fla., strongly takes issue with a number of points in the article, including an allegation that “the industry has been plagued by fraud complaints.”
Not only did the reporter fail to back up the statement, Haynie argues, but life settlements are actually a tremendous opportunity for consumers who no longer can afford, no longer want or simply no longer need a policy.
He accuses some life insurance companies of actually forbidding agents and employees from discussing the availability of life settlements with clients.
“I consider that criminal, not to tell clients of their options,” he says.
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Over the past 10 years, life settlement companies have paid policy owners more than $10 billion, which was $6 billion to $7 billion more than the cash surrender value of their policies.
