Life Settlement Industry To Die Within 2 Years

Did anyone else see this article?

This so called expert says that the life settlement industry is going to be dead within 2 years.


He makes some good points

He makes some good points about challenges, but I can't agree that the whole industry is going to go away. Not with investors getting 20%+ IRR's.

Who is this guy? Does he even

Who is this guy? Does he even know anything about life settlements?

I think he is some kind of an

I think he is some kind of an accountant. Not sure that makes him qualified to discuss life settlements.

Hatchet Job

Just another hatchet job in the media.

Life Settlement Option Notification

I am not sure how the life settlement industry is going to die when states are mandating carriers notify customers that life settlements are available.

If anything, I think the

If anything, I think the industry will grow as more capital returns to the market. If the industry was going to die it would have happened in the past two years. It is looking stronger and stronger as 2010 progresses.

  What a joke. The market is


What a joke. The market is doing much better this year than it was last year. If it is going to die in 2 years, nobody has told the market that.

I think the life settlement

I think the life settlement industry provides too much of a service that people want for it to go away in 2 years. I read in the article that the author thinks the funding sources will dry up in 2 years and that is why the industry will go away. I can't imagine that happening. I know some buyers have gone away such as Goldman Sachs, but I've also read that a lot of new ones have entered the market.


That's like saying no-one will invest in banks b/c a few have gone belly up in recent years.

Anyways, here's a recent article that speaks to the contrary:

I'll bet this guy works for a

I'll bet this guy works for a carrier in some way shape or form.

Of Course

According to his website, he's a CPA and expert witness for the life insurance industry. Furthermore, it looks like he sells insurance through his agency.

Here's a quote directly from his website:

Mr. Wallach literally wrote the book on "life insurance"
that CPAs and "insurance agents" are required to read
to learn about it!

So, when you are insured through "Lance Wallach"'s
office, you can rest easy at night knowing you have
worked with the best there is in the country!

Wallach borrowed that material from Life-Exchange


Looks like Mr. Wallach borrowed heavily from my original article in Life Insurance Selling Magazine titled "Is the Life Settlement Market Dying?"  
I do wish my views had changed since I wrote that in June but they have not.  I am an industry participant not an outsider so I have a much better understanding than Mr. Wallach.  Additionally while I appreciate the industry's optimism about things improving their view is simply to0 myopic and does not fully incorporate structural impairments in global credit flows.  

Raising Lots Of Questions

First David, after reading your article, it is clear that someone "borrowed" the content and claimed it as their own. Shame on them.

Secondly, I have to admit, I was a bull before reading your article and am now only "cautiously optimistic" about the market moving forward. Your article raised a number of questions in my mind that I would love to hear your thoughts on. If you don't mind, please post a reply and let us know what you think.

1) Why don't you think the spread between bonds and life settlements won't narrow beyond the 1000 bps? What keeps that as the threshold amount?

2) I understand why investors would choose bonds over life settlements in a vacuum, but what value do you see in life settlements as a way to diversify a portfolio? If life settlements offered an attractive return above bonds, wouldn't there still be some demand just to diversify a portfolio? Certainly retail and institutional investors alike have been burned by not being diversified enough in the past two years?  

3) Your article was written in 06/2010, a very scary time for sovereign debt. In addition, you affirmed your comments a few days ago in this forum.  However, the debt crisis seems to be easing somewhat and investor confidence is being restored in our economy. I would suspect that would equate to lower yields in the bond market? Are you expecting bond yields to remain high?

4) We saw the life settlement capital inflows stop between 2008-2010. Now it is returning and we are seeing it from new sources such as private equity, Asian investors and pension funds. In essence, we've seen some sources of capital (hedge funds, I Banks) dry up, while new sources have replaced them. Why wouldn't this cycle continue of new capital sources filling the void? Is it realistic to think all of these capital sources are going to follow the bond market when yields are high?

5) What role do non institutional investors or dedicated life settlement investment funds play? They may be more tied to life settlement investing than say a hedge fund that chase returns almost daily.  

6) It is obvious you are industry insider and speak from a place of sincere perspective. You've laid out a compelling argument based on plausible theories and facts. If you believe the end is coming, why are you still in the life settlement business and what is your company doing to prepare for the armageddon?  

After two years - still alive

Here we are about two years after the original "life settlement industry to die in two years" article and guess what the life settlement industry is still alive. Although, in reality it isn't thriving. The main impediments are the serious lack of inventory on the secondary market and the 21St services extension of life expectancies. 

Probably the biggest issue is the lack of inventory. Without new policies, brokers don't have anything to broker, providers don't have anything to purchase and investors don't have anything to invest in. Many brokers are shifting attention to the tertiary market because that offers the most immediate opportunity to generate revenue. Unfortunately, the lack of supply on the secondary market will affect the tertiary market, as it is the feeder system. 

More consumer education needs to be done in order to raise the awareness among seniors. However, that is nothing new. The life settlement industry has been singing this song for a while. What really needs to happen is the insurance agents need to become engaged by the life settlement industry again. Too many insurance agents are unaware or not interested in the life settlement industry. If insurance agents are excited, the consumers will come after being referred. More than anything, the life settlement industry needs to proactively restart the policy flow from the secondary market or it really will be dead in two years.