Life Settlement Securitizations
Another interesting article from InvestmentNews.com
Wall Street likes idea, but risks, market size are impediments
Buzz is building among financial firms about arranging life settlement securitizations, but experts question the structured products’ viability as an investment amid a lengthy list of risks and a limited track record of successful transactions.
Although private investors and investment banks recently have increasingly been analyzing life settlement securitizations as a new revenue source, the concept has been around for more than a decade. The first viatical securitization, which was provided by Dignity Partners Inc., took place in 1995, using policies belonging to the terminally ill.
To date, there has been just one successful life settlement securitization, which took place in January and involved American International Group Inc. More than 2,000 policies in that deal were provided by the Coventry Group, a life settlements firm.
“What I’ve seen is that the interest is heating up, but the volumes aren’t up,” said Jesse Schwartz, a consulting actuary at Watson Wyatt Worldwide. “Growth may be slow because the asset classes are new and complicated; investors need an extent of technical knowledge to participate.”
For securitizations to be successful, they must amass large pools of policies to provide sufficient diversity among the health conditions of the policyholders in the pool.
Read full article: Appeal of life settlement securitizations seen as limited
