Life Settlement News

LISA Questions NAIFA and AALU Support of Carriers Over Producers and Consumers

ORLANDO, FL–(Marketwire - May 1, 2008) - The two major associations representing insurance producers have enthusiastically endorsed legislation in several states that harms consumers, producers and the insurance industry as a whole. In doing so, both the National Association of Insurance and Financial Advisors (NAIFA) and the American Association of Life Underwriters (AALU) raise serious questions about their independence and ability to serve their members.

Despite ongoing controversy over the legislation, both NAIFA and AALU continue to actively support state bills based on the profoundly flawed National Association of Insurance Commissioners (NAIC) Viatical Settlements Model Act. A recent article in California Broker Magazine asserts that this support, which is in direct conflict with the interests of producers, is due to the fact that both organizations are economically beholden to life insurance companies. The article details how AALU’s advocacy arm is dominated by carriers and how financial contributions from major insurers prompted NAIFA to reverse its position on key provisions of the NAIC Model and adopt a patently anti-consumer and anti-producer stance.
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Oregon Proposes Fingerprinting Rule

This isn’t direct news regarding Oregon Life Settlement Regulation or Laws but is a step in the right direction regarding the the screening of applicants and renewing applicants. We stand behind their decision and feel that other states should adopt similar policies.

Oregon’s Department of Consumer and Business Services has proposed adopting rules that would require fingerprints of a person applying for issuance or renewal of a license as an insurance producer, insurance consultant, adjuster, life settlement provider or life settlement broker, in connection with a request for a state or nationwide criminal records check.

According to the DCBS, the rules are needed to enable the Director to request complete criminal checks at the state or federal level and facilitate the Department’s responsibility to ensure that license applicants under the Insurance Code meet all licensing requirements and to determine, with available information, whether applicants’ past behaviors might indicate potential hazards to the insurance-buying public. Failure to adopt rulemaking on this topic will result in the Department’s failure to carry out the authority granted by section 1, chapter 619, Oregon Laws 2007 and the consequent failure to properly inquire into possible criminal histories of applicants for renewal or issuance, it stated.

The last day to comment on the proposed rule is May 28. For information on the proposed rule and to submit comments, visit:
Oregon Fingerprinting Notice

Source: DCBS 

BDM Direct to distribute Life Settlements Fund

Melbourne-based fund distributor BDM Direct has been appointed to distribute US-based Life Settlements Wholesale Fund (LSWF) in Australia.

BDM’s brief from LSWF responsible entity Life Settlements Fund Limited is to drive the retail distribution of the fund in Australia via dealer groups and financial planners.

Launched in Australia in October 2004 as the country’s first life settlement fund, LSWF is currently available to wrap investors in Australia via six different platforms.

The fund owns 488 individual whole-of-life insurance policies from 60 US insurance companies, which are held in an open-ended structure until maturity.

It then distributes the payout to the pool of clients who are invested in it through a unit trust, with investors receiving quarterly distributions and dividends.

It achieved FUM of $384M as at the end of June last year and is now in excess of $1.1 billion, including some big institutional mandates, according to BDM national account manager Andrew Fenton.

The retail market’s contribution sitting at $250 million, which, Fenton said, BDM, together with Life Settlements Fund Limited, is “working to increase”.

Fenton said he “hoped to get a good research rating for the fund, which would help to grow its representation on dealer group recommended lists”.

“The existing research is being supplemented by major research houses as the interest in this asset class, with its non-correlation, is growing daily.”

He pitched the fund “alongside international bonds as far as risk goes but with substantial potential for upside, its performance being somewhere in the vicinity of 10 to 12 per cent per annum”.

Source: Money Management - Liam Egan

Again, a majority of this recent rise in life settlement regulation and legislation is due to rise in STOLI policies and “wet paper life settlements”.  Here is an excerpt from the article:

At least 20 states are considering legislation dealing with the life settlement industry and STOLI. This session, two bills have been introduced in Minnesota.

HF3534, sponsored by Rep. Kate Knuth (DFL-New Brighton), calls for a five-year period between the time a life insurance policy is issued and the time any type of life settlement agreement could be reached. The bill is based on the Viatical Settlements Model Act of the National Association of Insurance Commissioners. It awaits action by the House Commerce and Labor Committee.

“A life insurance policy that is just made for someone else dying as an investment is bad,” Knuth said. “The people who need a life insurance policy, and those who buy and sell them, no one wants it to get out of hand. The question is: How do we decide to regulate?”

A companion bill, SF3063, sponsored by Sen. Linda Scheid (DFL-Brooklyn Park), awaits action by the the Senate Commerce and Consumer Protection Committee.

Another bill takes a slightly different tact. HF3878, sponsored by Rep. Leon Lillie (DFL-North St. Paul), also focuses on restrictions to STOLI practices, but does not have the five-year waiting period. The bill adopts language supported by the National Conference of Insurance Legislators. It, too, awaits action by the House Commerce and Labor Committee.

“It’s hard to think of life insurance like a house, or as a product or property that someone might own, but it is.” And with the bill that he has introduced, “you would be able to cash out if you want to.”

Though he is still learning about many of the issues involved, Lillie agrees that the STOLI problems need to be addressed, even though the consumer issue is just as important. “If you own something, you should be able to sell it.”

A companion bill, SF3495, sponsored by Sen. Dan Sparks (DFL-Austin), awaits action by the the Senate Commerce and Consumer Protection Committee.

Source: Craig Green, Session Weekly
Full Life Settlement Article: A roll of the dice

Independent financial advisers and multi-managers are turning to alternative asset classes to provide their investors with strong and more consistent returns according to EEA Fund Management.

The continued market volatility is forcing investment professionals to seek alternative ways to diversify their portfolios and EEA’s Life Settlements Fund is reaping the rewards as a result of its 26 consecutive months of positive returns, beating its benchmark of 8% p.a. net of charges, with the demand for access to the fund from the SIPP market also growing. EEA is also currently in talks with a number of major market names in a bid to take the innovative fund to the next level.

The pressure on those managing assets in equities and bonds has never been stronger, and teamed with relatively low interest rates on cash mean investors are increasingly seeking strong, consistent and low-risk returns in 2008 and having to look to alternative assets.

Life settlement funds are one beneficiary of this shift. Life settlements are the sale of a US life insurance policy to a third party, where the insured has an impaired life expectancy. They are completely uncorrelated to other asset classes and stock market volatility. Over the last six months the EEA Life Settlements Fund has consistently outperformed cash (+0.6%), UK equities (-5.5%) and bonds (-0.7%) by returning +4.88%.

Peter Winders, Marketing Director at EEA Fund Management, said: “The EEA Life Settlements Fund has delivered consistently good returns since its launch over two years ago while equities and bonds continue to tread a volatile path. It is an extremely interesting time for us at EEA as we are seeing a considerable increase in interest from IFAs looking to take their clients investments into safer waters, and also multi-managers who realise that we have continued to deliver in the face of adversity.

“IFAs and multi-managers recognise the value of uncorrelated assets in diversifying risk out of portfolios and we have seen increasing demand from this contingent. Life settlements also make perfect pension investments and we are looking to target this sector of the market moving forward.”

Alan Stokes, Head of Investment Funds at Lawrence House Fund Managers, said: “One of the attractions of the EEA Life Settlements Fund has to be its total lack or correlation compared to other investment mediums such as cash, equities and fixed income stocks. This lack of correlation can be of particular interest to those seeking to reduce volatility within a portfolio. The introduction of a sterling distribution share class has proved popular given the funds estimated yield of 7% to 8%. With more and more investors demanding a yield greater than inflation, as measured by the Retail Price Index, this fund has proved that this is now possible and without the high level of capital erosion normally associated with high yielding products.”

Roderick Collins, Founding Partner of London-based IFA Hasley Investment Management, said: “We specialise in bringing highly diversified investments to our clients on an open architecture basis and feel the Life Settlements Fund fits in with this. We have found the EEA Life Settlements Fund to be a particularly useful investment both because of its consistent positive returns and its zero correlation to equities. It is a core holding in our Multi-Strategy Fund and will also feature in our new Diversifier Fund.”

The life settlements market remains relatively untapped with $1 trillion in face value of policies lapsing or being surrendered each year in the US. Of this amount some $200 billion worth of unsold policies would be eligible for the EEA Life Settlements Fund to buy (i.e. policies of those individuals with life expectancies of eight years or less).

Source: Easy Finance 

If you are interested in selling your policy or have a client you would like to assist with the sale of their policy, please call 1-888-973-8377. We would be glad to provide a no-cost evaluation and consultation.