By "Lance Wallach"
Many insurance professionals now think that the life settlement market is ending. Agents assisting their clients in the sale of
their unneeded "life insurance" policies have no doubt been frustrated by the lack of bids in the current life settlement
market. It doesn’t help much either when the few bids that are made are often much less than what they would have been in
And what about the lawsuits that have started? The "life settlement" market saw double-digit annual growth for a decade until
2008. When the financial crisis hit, global markets and credit evaporated, and the life settlement markets came to a standstill.
How did this happen to a market that was supposedly not correlated to other markets?
The life settlement market has long been touted as a non-corollary asset class. Even today many promoters looking to raise
funds from investors still highlight this investment benefit. I have always doubted everything about the market and have
urged people to stay away. How would you know if Tony Soprano is buying your mother’s life insurance policy? I am a member
of the Sons of Italy. I was awarded membership even though I am Jewish. Why? Because I am a friend of the President of the
Interest rates and stock market prices impact the portfolios of life insurance carriers. The solvency of a life insurance
company directly impacts its ability to meet death claims. Why would life settlements be immune? If carriers like AIG teeter
on the edge of financial ruin, then credit risk becomes a primary concern for life settlement investors. You may have heard
that an ‘A’-rated carrier has never failed to pay a death claim. This is a great lie. The insurance company is usually no longer
rated ‘A’ by the time they fail to pay.
I think that the life settlement market will not have any future source of funds within two years.
Life insurance companies have been attacking the market for years. Their vast experience in underwriting has already proven
victorious as table changes in 2008 damaged the Net Asset Value of all life settlement funds. Their lobbying against life
settlements has also been successful. Overly burdensome and poorly written "life settlement regulation" in various states has
simultaneously increased the operating expenses for life settlement firms and decreased the opportunity for the consumer.
Life insurance companies are adjusting their COI rates higher and blaming life settlements for the change. They will sell
insurance to preserve and protect wealth, yet the very products they sell are backed by investments mired in mountains of
debt, equities with high P/E ratios, and issued in a currency that is deeply flawed. Even though many carriers survived the
Great Depression, our financial markets are considerably more complex today than they were then and this may cause many
carriers to soon find themselves with big problems in the future
Lance Wallach, CLU, ChFC, the National Society of Accountants Speaker of the Year, also writes about retirement plans, 412(i)
plans, and 419 plans. He speaks at more than ten conventions annually, writes for over fifty publications, and is quoted regularly in
the press. He has authored numerous books for the AICPA, Bisk TotalTape, Wiley and others. Mr. Wallach does expert witness work
and his side has never lost a case.
The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual
or other entity. You should contact an appropriate professional for any such advice. I am not the plan administrator and I have
nothing to do with the plan.
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"403(b)", "IRA", or "Life Insurance Settlement "
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