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Michael Bradburn January 19, 2018

$8,900,000,000,000

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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…

$8,900,000,000,000

$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.

To continue following us, please subscribe to our News and Views blog by visiting our section on our website. To learn more about us and how we can be a resource in this space, contact Jason Bokina at 404-504-7006 or email contact@capaltstrategies.com.