Timelines
General History - Life Settlements
Legal & Regulatory History
General History - Life Settlements
Today
INDUSTRY GAINS IN LIQUIDITY DRIVING YIELDS TO MID-TEENS. ALTHOUGH VOLUME IN THE SECONDARY MARKET IS STILL SUB $2B THE TERTIARY INDUSTRY CONTINUES TO TRADE OVER $7-10B/ YEAR OF ITS AVAILABLE $90B OF OWNED POLICIES. LONGEVITY, LITIGATION, AND REGULATORY DEVELOPMENT TIMELINE
2013 / 2014
Apollo and Blackstone enter as major buyers taking advantage of limited capital sources and 10 years of performance data to support longevity forecasting going forward. TPG and Berkshire Hathaway also begin to dabble in the industry.
2013
The secondary market has slumped to pre-2003 levels (less than $2b) and remains at this level today.
2010 / 2012
Only major buyers that are active are AIG, a few foreign pension funds, and Preston Ventures through its affiliates.
2009 / 2011
Some distressed portfolio sellers are forced to sell leaving large portfolios in the hands of Fortress, Mckinsey & Co., Monarch, and Kohlberg.
2009
Carriers reprice new issue products and implement underwriting standards such that premium finance is no longer a viable investment.
2009
Global financial crisis and reevaluation of life expectancies dries up most available capital for life settlements causing an illiquid market. Returns for the few policies/portfolios sold now in excess of 20%.
2007
MAJOR BANKS AND SOME REINSURANCE COMPANIES INCLUDING WELLS FARGO, RBS, WACHOVIA, HANOVER RE, FIFTH THIRD, WEST LB, DZ BANK ALL BEGIN TO FINANCE PORTFOLIOS OF LIFE SETTLEMENTS FOR INVESTORS.
2006
FASB sets standards for accounting for the asset class.
2005
Premium finance becomes a dominate origination tool for agents as Investment from Hedge Funds and Investment Banks increased demand for product outstrips $2b “natural” supply. Manufactured policies spike available supply to over $10b annually.
2004 / 2006
LIQUIDITY GROWS FOR LIFE SETTLEMENTS AS WALL STREET FIRMS AND EUROPEAN BANKS INCLUDING GOLDMAN, UBS, KBC, DEUTCHE BANK, MERRIL LYNCH, DAVIDSON KEMPNER, AIG, MIZUHO AND OTHERS TO ENTER THE ASSET CLASS AS DIRECT INVESTORS.
2003
First rated securitization of packaged life settlements combined with annuities are sold to investors (LILACs).
2002
German closed end funds become the primary buyer of life settlements, taking advantage of a tax loophole until the loophole is closed in 2006.
early 2000's
Life Settlements become a $2b industry, allowing seniors a fairly liquid alternative to “cashing in” to the life carrier.
1995
Life Insurance Settlement Association (LISA) is formed to regulate the industry and develop professional standards.
1980's
HIV/AIDS epidemic provides catalyst for market – especially those with a life expectancy of less than 2 years.
1911
US Supreme Court rules that life insurance policies are personal property and as such can be assigned to any other person, including those without an “insurable interest”.
Legal & Regulatory History
Today
MULTIPLE CLASS ACTION AND DIRECT LAWSUITS IN A VARIETY OF JURISDICTION ARE FILED AGAINST AXA, TRANS, LINCOLN, AND OTHERS FOR BREACH OF CONTRACT AND FALSE ADVERTISING RELATING TO THEIR COI INCREASES. THESE ACTIONS ON BEHALF OF INVESTORS AND POLICY OWNERS HAVE BEEN ALLOWED TO PROCEED AS INITIAL SUMMARY JUDGEMENT DISMISSALS ARE DENIED BY THE COURTS.
2016
Minnesota and Florida supreme courts rule to overturn lower courts decisions resulting in Life Settlement owners having limited to no risk that carriers will be required to pay claims. The number of new litigation brought by Carriers against investor owners has fallen to a de minimis number annually.
2015 / 2016
Given Phoenix retained substantial value of the COI increase in its settlement, 7 carriers decide to increase COIs on over 30 products, under the auspices of poor performance of their general accounts due to low interest rates.
2015
PHOENIX SETTLES COI CLASS ACTION LAWSUIT IN THE FORM OF A PARTIAL MONETARY SETTLEMENT, AN AGREEMENT NOT TO CHALLENGE POLICIES EVER, NOR FURTHER INCREASE COIS BEFORE 2021.
2014
21st services extends it’s LE forecasts for a second time making it the second longest average LE provider in the industry.
2013
Phoenix due to ratings downgrades and regulatory actions looks to boost profits by increasing premiums on Paul 1 & 2 products (heavily invested owned products)
2012
DELAWARE BECOMES THE ONLY STATE WITH CASE LAW THAT SLIGHTLY FAVORS INSURANCE COMPANIES, AS THE DE SUPREME COURT RULES THAT PREMIUM FINANCE MAY CONSTITUTE A POLICY BEING “VOID AB INITIO”. CARRIERS WOULD HAVE TO RETURN PREMIUMS TO INVESTORS. BY 2012: 42 STATES HAVE PASSED LEGISLATION REGULATING THE INITIAL SALE OF A LIFE INSURANCE POLICY PROTECTING BOTH CONSUMERS AND LIFE SETTLEMENT COMPANIES FROM INSURANCE COMPANIES. THREE OTHER STATES HAVE PASSED VIATICAL SETTLEMENT REGULATION, LEAVING ONLY 5 STATES UNREGULATED.
2011
AVS, one of the dominant LE provider extends its LE forecasts a second time
2009 / 2010
NY and CA courts rule against carriers, confirming investor’s rights to payouts even in exceptional circumstances (Kramer & Fishman cases). Many other states follow CA and NY lead in the years that follow.
2009
Carriers attempts to lobby states to pass punitive legislation fails as legislatures take a measured approach based on LISA and industry voices rational that the consumer, the insured, is protected by a free market.
2008 / 2011
Carriers pivot to litigation of claim payouts on existing investor owned policies. Hundreds of cases are filed in many jurisdictions by a variety of carriers.
2008
The Society of Actuaries introduces 2008 VBT dramatically changing life settlement underwriter assumptions and extending LE’s for all providers.
2007
CARRIERS AGGRESSIVELY BEGIN ATTACKING THE INDUSTRY BY 1) NOT ISSUING TO INSUREDS WHO ARE USING PREMIUM FINANCE 2) PENALIZING AGENTS WHO TARGET LIFE SETTLEMENT CLIENTS AND 3) INTRODUCING AND LOBBING FOR DRACONIAN LEGISLATION IN MOST STATES (WHICH IF PASSED WOULD ELIMINATE THE INDUSTRY ENTIRELY).
2006
FASB sets standards for accounting for the asset class.
2005
Carriers distribution teams aggressively pursue premium finance lender pipeline to hit year end production goals.
Early 2000's
Very few states regulate life settlements and Carriers don’t even acknowledge to industry as an opportunity or a threat.
Timelines
