Funds expect 2009 growth in life insurance trading

Feb 18th, 2009 | By Hot News Reporter | Category: Insurance Today

(Reuters) – Fund managers who buy U.S. life insurance policies to cash in the death benefits have predicted a bumper year in 2009 as investors seek uncorrelated alternatives to mainstream markets.

Supply is also is expected to increase as more individuals, stung by tumbling investment portfolios, could sell their policies at discounted prices.
Managers of funds investing in traded life policies TLP.L are forecasting assets under management could as much as double as mandates pour in from other fund managers, hedge funds and high net-worth individuals seeking steady returns uncorrelated to equities and bonds.

“We are in a situation where property, equity and bonds or a bank account, are not going to deliver. People have to look further afield and they have to make an effort to understand other asset classes,” said Jeremy Leach, managing director at MPL, a boutique investment house specialising in TLPs.

Under a TLP deal, the insured party — generally a person over the age of 65 — sells their policy to a buyer at a discount for a lump sum, giving the buyer the right to collect the death benefit.

The Insurance Studies Institute said in a report published last month that it estimated the TLP market would reach $21 billion (14.8 billion pounds) by 2012. In 2007, the market was estimated at around $12.2 billion.

The concept of leveraging the value in life policies was developed in response to the AIDS epidemic. TLPs evolved as a separate strand unconnected to terminal illness.


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