As the possibility of a global double dip recession looms in the distance, the life settlement market is seeing some positive signs. After a difficult 2009 and early 2010, life settlements look poised to be on the rise. Overall, industry participants are cautiously optimistic about the near term future of the secondary life insurance market.
Industry experts are drawing some optimism from recent anecdotal evidence. Life settlement providers were previously paralyzed due to a lack of funding. Some went out of business, but those that survived are now seeing a return of funding sources. In fact, some providers are now representing multiple funding sources and aggressively looking for cases from life settlement brokers.
The Amrita Life Settlement Index reported a steep gain in April based on increased buying activities by life settlement providers. Most noticeable was a sharp increase in the amount of bids being submitted for life insurance policies on the secondary market. The increased competition suggests a strengthening market overall. A stronger, more competitive market will benefit sellers with higher sales prices.
At the dawn of 2010, many hoped that Europe could provide some liquidity into the United States life settlement market. A recent European trade mission along with strong interest from European institutions were interpreted as clear signals that the American secondary market for life insurance policies would rev up this year. Many were optimistic that foreign investment would add liquidity to the American market and somewhat normal buying activity would resume. Europe’s most recent economic crisis has measured those hopes. The Euro dollar is on an extended slide against the US dollar creating an additional incentive for European investors of US life policies. However, the underlying European economy is undermining the investment climate there and eroding the ability of institutions to make these kinds of long term investments. European investment banks and funds are now concerned with liquidity as they watch other assets lose value during the PIIGS crisis.
Although Europe may not be the savior of the American life settlement industry, we may not need them. Small but important signs are pointing to a recovery that is already underway. Life settlement providers have money and are actually buying policies. Compared to the troubling time of the recent past, this is a welcome change in anyone’s book.
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