Life Settlement Buyers / Life Settlement Funders
In the life settlement industry, life settlement buyers are often referred to as life settlement funders. In addition, they are sometimes referred to as life settlement purchasers, life settlement investors, or life settlement financing entities. On this website, the terms life settlement buyers and life settlement funders are used interchangeably to refer to the parties who are actually providing the funds to purchase policies.
Life Settlement Investors
When we use the term life settlement investor we are instead referring to an individual or entity that later acquires a share or interest in a fund or security whose underlying policies were previously acquired by life settlement buyers / life settlement funders.
Typical Life Settlement Buyers / Life Settlement Funders
Life settlement buyers / life settlement funders are typically institutions such as investment banks, hedge funds, and international banks. These institutional life settlement buyers / life settlement funders have become major players in the settlement, financing and securitization sectors of the life settlement industry.
Why Are Life Settlement Buyers / Life Settlement Funders Interested in Life Settlements?
Life Settlement Buyers / Life Settlement Funders are often attracted to life settlements because the returns are not correlated with the movement of the S&P 500. In other words, the mortality gains from life insurance are dependent only on the life expectancies of the individuals insured. As a result, the uncorrelated nature of a diversified life settlement portfolio offers a hedge against the market risks of other investments. For example, when a hedge fund adds life settlements to its portfolio, sensitivity to risk is lowered which results in higher risk-adjusted returns for the fund's investors.
Avoiding Life Settlement Life Settlement Buyers / Life Settlement Funders Conflicts of Interest
Some regulations prohibit a life settlement broker from funding life settlement transactions with a life settlement provider or buyer that is controlled by, or under common control with the life settlement broker. To avoid this conflict, you should make sure your life settlement broker agreement guarantees to disclose all known "common control" conflicts of interest.