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Michael Bradburn January 19, 2018



Since the inception of the Senior Life Settlement Industry, investors have purchased policies from a wide variety of life insurance companies. To be more specific, we are only concerning ourselves with cash value life insurance policies.

The financial performance of a life insurance company is dependent on the amount of premium dollars flowing in from in-force policies to fund their claims reserve in amounts greater than money flowing out to pay death claims. You’re welcome for the rocket surgery lesson.

The life settlement industry executed $25 Billion in transactions in 2016. That’s a big number. Here’s a bigger one…


$8.9 Trillion of cash value life insurance was in force at year-end 2016, according to an analysis of 10-K’s filed with the SEC. The life settlement industry, based on these numbers, represent a real threat. One certainly indicative of a clear and present danger to the profitability of life insurers necessitating, in part, is an increase in the Cost of Insurance (COI). Here’s a little help with the math…

The life settlement industry adversely affects .00280899% of the universe of in-force policies. Certainly, cause for concern…Those great big office buildings ain’t free.

Although the numbers don’t really paint a picture that the life insurance industry is in any real peril, the COI increases levied by some carriers have had a very real impact on life settlement investors. The amount of premiums paid to policy maturity has a direct effect on the investor’s yield to maturity.

In the life settlement world, premium reserve management has been the cause of missteps by many. Extended longevity is the circumstance where a life settlement policy ultimately matures long past the assessed life expectancy of the insured. In many cases, early policy maturities have been over-estimated and extended longevity, inversely, under-estimated.

For this reason, Capstone Alternative Strategies has developed a unique Extended Longevity Risk Transfer mechanism in the Premium Reserve Management (PRM) Solution. The effects of Extended Longevity, life carrier COI increases and other erosive circumstances that can reduce a life settlement investment’s yield are remediated by the solution.

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