3 Life Settlement Trends To Watch In 2019

Feb 6, 2019 12:00:00 AM / by Darwin Bayston, CFA

Insurance professionals have monitored the life settlements industry with a watchful eye in the aftermath of the significant market contraction a decade ago.

But after working through some challenges related to regulation, capital flow and underwriting, the life settlements industry is coming off another year of growth in 2018 and seems poised to remain on that steady growth trajectory.

Conning & Co. released an independent study of the market in November titled “Life Settlements: Continued Growth, Positive Outlook.” The report said, “The volume of new settlements continues to increase, a positive indicator for growth in the number of in-force life settlements.”

Another independent market study conducted in 2018 was published last June by The Deal, in which they reported a 19 percent increase in life settlement transactions during the prior year.

As we embark on a new year, we see three prominent trends in the life settlements industry.


  1. Direct-to-consumer marketing.


In the early days of the life settlements space, providers and brokers focused on building a pipeline of financial advisors and other professionals (e.g., estate planning attorneys, wealth managers, etc.) in positions to identify clients who might benefit from selling their life insurance policies. In recent years, however, some of the leaders in the industry have invested significant resources into direct consumer marketing. This direct-to-consumer marketing has yielded significant results for the life settlement industry, broadening consumer awareness of the life settlement option, and is likely to increase in the year ahead.


  1. Technology advancements that improve underwriting.


Technological innovation is placing its stamp on every niche market in the financial services industry, including life settlements. By leveraging new technologies and data systems, we will see faster transactions conducted in 2019, supported by more efficient underwriting methodologies. This will be made possible by new and innovative strategies to estimate life expectancies. These strategies include technology tools that help professionals to arrive at more accurate projections – such as a new data-driven approach that relies on prescription and clinical history database searches, and innovations in projecting life expectancies for life settlement transactions.

  1. More capital flowing into the asset class.

Two large life settlement investment funds were announced in 2018. Each of these funds raised nearly $900 million, with significant capital pouring into the asset class from institutional investors such as pension funds and family offices. The Conning study noted that growing investor interest in the category reflects “the stability of the life settlement landscape.” In the year ahead, we anticipate that more capital will flow into life settlements, especially as institutional investors seek out returns that are not correlated to the performance of the increasingly volatile equity markets.

Agents and advisors who may have watched the maturation of the life settlement industry with a skeptical eye would be wise to give life settlements a fresh look in 2019. The industry is now well-regulated, enjoys a healthy flow of capital to fund policy purchases, and is rooted in sound business practices — including policy underwriting — that are powered by advanced technology systems.

What remains unchanged is the basic value proposition for professional advisors to contemplate: If you have a client over the age of 70 who no longer needs or can afford their life insurance policy, they may be able to sell it on the open market for significantly more cash than what they would receive by lapsing or surrendering the policy.

Looking ahead to 2019, there are some important trends to monitor as the life settlements industry continues to grow in both size and strategic importance to professional advisors. This year, one creative way for you to help your clients is to evaluate all potential assets available to them and monetize every asset you possibly can. A common asset that many of your clients presume to be illiquid — that life insurance policy they bought years ago — may actually be used to produce immediate cash right now.

Darwin Bayston, CFA, is president and chief executive officer of the Life Insurance Settlement Association.

Darwin Bayston, CFA

Written by Darwin Bayston, CFA

Darwin Bayston is President and CEO of the Life Insurance Settlement Association (LISA). His charge is to extend the outreach of the Association to all participants of the life settlement industry from consumers to capital providers, including producers, brokers, providers and service providers who are part of the life settlement market. He was previously Managing Director of Life Settlement Consulting & Management (LSCM), founded in 2004 and specialized in life settlement policy and portfolio valuations, and life expectancy analysis. He has published several articles and participated as speaker at a number of life settlement conferences. Previous to that he operated an investment advisory firm. From 1980 to 1993, he served in several capacities, including President and CEO the CFA Institute (and its predecessor organizations). While at CFA, he founded the continuing education program, was editor of the CFA Digest and supervised research projects funded by the Research Foundation of the ICFA. He began his career as an investment analyst with a Midwest life insurance company. Mr. Bayston has been Chairman of the Martha Jefferson Hospital Foundation ($100 million), a member of the Hospital’s Finance Committee and a past member of the Board of the Institute for Quantitative Research and Finance (Q Group).