LIFE SETTLEMENTS - RISK & RETURNS
The impact of life expecatancies
Life expectancy estimates (‘LE’) are the most important variable if it comes to investments in life settlements. Life expectancies are ordered with specialised companies, so called medical underwriters.
There is little academic research available in the field of life expectancies despite of their paramount importance. However a study written by Jiahua Xu - Dating Death: An Empirical Comparison of Medical Underwriters in the U.S. Life Settlement Market - was published in the North American Actuarial Journal on July 31st 2019. The article can be downloaded here.
ESTIMATING GROSS MARKET RETURN FOR LIFE SETTLEMENTS
Our initiative for transparency regarding life settlement transaction prices has created huge insight about the trading activity in the secondary and tertiary market, the pricing mechanism for life settlements and nowadays even allows fair market valuations of policies. While much knowhow is available for markets and prices, the industry still lacks reliable information regarding realized returns of life settlements. Therefore the European Life Settlement Association (ELSA) in collaboration with Mike Fasano of Fasano Associate and AAP has published a paper combining actual mortality experience with current market prices to estimate expected gross returns of life settlements and shows the sensitivity of returns in relation to the acquisition price.
Click here to download the paper “An Approach for Estimating Gross Market Return for Life Settlements” published be ELSA.
RISK & RETURN OF LIFE SETTLEMENT FUNDS
The life settlement markets developed since the 80’s of the last century. After the market turned into a senior settlement market in the late 90’s the first investment products were launched. Therefore quite a long history of investment results is available.
AAP owns comprehensive data bases regarding the past performance of life settlement products, including open end funds and uses this information for the ‘AAP Life Settlement Index’ and its advisory business. In addition AAP provided the necessary data for a study regarding ‘Risk and Return of open-ended Life Settlement Funds’ of the renowned University of St.Gallen (Switzerland). The study can be downloaded here. If you have questions regarding the results or the publication please get in contact with us under info(at)aa-partners.ch.