Michael Abraham

By Bob Graham

Posted: April 27, 2011

The life settlement industry is positioned for “one of its strongest years in recent memory,” according to a financing company chief executive.

Chris Ledlie, CEO of Opulen Capital, based in Manhattan Beach, Calif., said the last couple of years of battling a struggling economy and lack of capital have given way, leading him to see that “optimism remains high” for life settlements, according to a statement.

“The industry as a whole has seen a vibrant recovery and the worst is certainly behind us,” Ledlie said. “We’ve seen many buyers return to aggressive bidding which has had yielded extraordinarily positive results for our clients.”

The life-settlement sector is “a viable market option” again, since the increase in increase transparency and disclosure, better industry practices and “meticulous underwriting,” according to Clark Hogan, managing director at Opulen Capital, a specialized financial service firm focusing on the life insurance needs of senior citizens.

For more than two years, starting with the global financial crisis in September 2008, funding for life settlements disappeared, as investors held their money. Since then, some states have imposed tighter restrictions on the sale of life settlements.

“These [regulatory] actions serve to control the industry, push out the bad actors, instill greater confidence in institutional investors who plan on purchasing life settlements and create a better experience for the financially distressed or overinsured senior citizen,” Hogan said.

Sagging housing values and delayed retirements caused by the recent financial downturn have baby boomers seeking creative methods to raise money, including selling their life insurance policies to investors to fund their retirement lifestyle, according to Opulen Capital.

http://ifawebnews.com/2011/04/27/life-settlement-bidding-aggressive-set-for-one-of-strongest-years/

Commentary by Michael Abraham:

Well done Chris, some positive news – and it got printed.

Since 2001, American International Group (AIG) through its Chartis property-casualty division, has been engaged in a line of business that is almost too gruesome to be true. AIG calls the business line “life-settlement”, but critics of the practice have called it “death bonds”, “blood pools” and “collateralized death obligations”.

This is the way it works. Let’s say that you and your spouse are getting up in years, but you are afraid that you did not adequately save up for retirement. In fact, as you reach your mid-seventies, you find that you still have a substantial mortgage on your home, credit card bills, and other household debt that will make it difficult, if not impossible, to retire. The one asset you do have is a nice whole-life insurance policy that you pay a monthly premium to maintain. For the sake of argument, let’s say your total death benefit is $200,000, which you pay a monthly premium of $200 to maintain.

Your friendly insurance agent says to you, “Hey, why don’t you cash out your life insurance policy now, that way you can pay off your debts and retire with some relative comfort?” The insurance will pay out 75% your life insurance benefit now, take over your monthly premium payments and then receive the full benefit for themselves when you die. So you get a check for $150,000, and you have one less bill to pay. The insurance company realizes a reduced claims loss by paying you less than if you died today, and the additional premium cost can be applied to “loss control” expenses. It’s a win-win, right?

The obvious risk to this program is this: What if you don’t die? Yes, everyone dies, but with life spans constantly expanding, a person in their mid-seventies may not find themselves in the Hereafter for another twenty or thirty years. At the most, $150,000 (taxed as regular income if you take it in a lump-sum) will last you three to five years, at which time you will find yourself looking for other ways to generate the cash you need to survive. By the time you actually do die, your family may discover that they owe tens of thousands of dollars in new debts and no life insurance check to pay for them.

Meanwhile, the insurance company’s risk is not so dramatic. By paying out the early death benefit, they saved their company $50,000 in “recovered losses”. Remember that they will assume the monthly premium of $200 a month for the policy. In that scenario, it would take nearly 21 years for the insurance company to “lose” on their bet. However, if the insured dies within ten years, the company will have saved themselves $25,000 in “recovered losses”, while the family of the insured will be likely on the hook for over $100,000 in new debt.

But wait, there’s more!

AIG estimates that the accumulated death benefits that they’ve written since 2001 is worth at least $18 billion, and they now want to sell that benefit as a security to investors. (That’s about $4.5 billion in life insurance benefits that was supposed to go to our grandparents and their heirs, but is now contributing to the profits of the insurance industry!)

This is the way it would work. Let’s say AIG takes a “pool” of these “life settlement” policies that are worth $500 million once all the participants in the pool have died and it sells it to an investor as an investment vehicle. As each person in the pool dies, the investor will receive a payment, and each month, the investor will either pay the premiums on the policy, or net the received death benefits against the remaining premiums that are due. The market value of the security will be determined by the number of policy holders in the pool. It is unclear as to whether the ages of the particpants will be included in the prospectus of the security but if it is, it will likely be hidden behind technical language much the same way that Subprime Mortgage-Backed securities are hidden. That is why critics have called this security a “death bond”. The more people that die, the larger the payout for the investor!

Thankfully, Standard and Poors (S&P) has refused to grant this type of security a rating, so at the moment they cannot be sold to investors. However, if Finch or Moody’s decides to give this type of security a rating, the implications for senior citizens would be dire.

1) Investors are constantly looking for new investment vehicles that can provide a positive cash flow with limited risk. The “Death Bond” would allow investors to realize investment gains that will not be tied to the overall economy. In fact, if the economy gets worse, it is more likely that the health of seniors on a fixed income will suffer. Therefore, this investment could be considered an excellent “hedge” against a poor economy. If Medicare changes to a voucher system where seniors will be at the mercy of Health & Life Insurance companies, these securities will be HOT!

2) In order to feed the sudden demand for these types of securities, life insurance companies will actively seek out elderly seniors to add to their pool. This is one case where having a poor health history would make you attractive to the insurance companies! This is what happened with the Subprime housing market. The need to feed the demand for Subprime Mortgage Security market encouraged lenders to grant mortgages to anyone with a pulse (sometimes a name was enough).

3) As seniors with poor health histories are eaten up by these “pools”, they’ll start going after people who are in relatively good health, but are suffering from financial difficulties. These are the people that will find themselves making a choice between suicide and burdening their families with massive debts after their money runs out. The insurance company nor the investor won’t care because the benefit pays out whether the insured dies from suicide, homicide or natural causes! In other words, the insurance industry and their investors would have an incentive to ENCOURAGE your death, whether you are in bad health or not!

4) Seniors that stubbornly hold on to life years after the policy has run out may find their medical insurance claims mysteriously held up or denied. Families may find themselves in time-consuming appeals with health insurers as grandma slowly fades away. Doctors may find themselves under increased pressure from their insurance carriers to refrain from life-saving treatments or to pressure families to include DNR (Do Not Resuscitate) orders with every patient over 75 years-old who enters the hospital.

Besides the obvious “ick” factor when it comes to this practice, it is yet another example of how the extremely wealthy will take your very last dollar in order to protect their wealth from a financial system that is designed to push all wealth from the very poor to the very rich.

This has to stop

http://www.nolanchart.com/article8594_New_Investment_Vehicle__Death_Bet_Securities.html

Commentary by Michael Abraham :

‘This has to stop’ – true this negative sensationalist reporting has to stop.  The journalist is supposed to be a serious reporter of events and while some of his points are reasonable and valid, the need to emphasize his/her points by using such emotive language is to react in kind ‘quite sickening’.  Write the article properly why not!  Afraid it won’t get printed?

American International Group is seeking to garner support from investors and credit ratings firms for the sale of securities backed by life insurance policies on older people.

So far, AIG has failed in its attempt to get support of the controversial securities, named “death bonds” and “collateralized death obligations” by critics. Standard & Poor’s has refused to provide the securities with a credit rating, citing an S&P report outlining the “unique risks” of the securities.

In addition, life insurance industry trade group American Council of Life Insurers has criticized the practice, arguing it could encourage fraud when agents paid through commissions and others may entice older people to purchase and sell their life insurance policies. Furthermore, it is bad for the industry’s reputation, life insurers have said.

AIG has about $18 billion in anticipated death benefits in its life settlements portfolio.

Commentary by Michael Abraham:

If AIG can’t get a rating, you have to ask what are the ‘unique risks’?  The obvious one of course is the life expectancy risk .  This writer believes that one of the ways (possibly only?) is to ensure that there are many VARIED lives in that portfolio

http://pwcaster.us/r/wire/d/contentFocus/?pcID=56d1a4d514c31c9871e5076919710f2f

ORLANDO, FL–(Marketwire – Apr 19, 2011) – Focusing on “the resurgence of the life settlement market,” LISA’s 17^th Annual Spring Life Settlement Conference on May 4^th – 7^th in Washington, D.C. is set to bring a new depth of knowledge to investors while expanding the issues to other industry segments.

As the industry matures, capital markets are renewing their interest in life settlements. Indeed, the recent Institutional Investor Life Settlement Conference concluded its full day of sessions with an eye on a future ripe for increased demand suggesting that the rebound is already in progress. “We are at a tipping point in the market! Investors are waking up to a real opportunity,” says Russel Dorsett, President of LISA.

The Spring Life Settlement Conference will feature experts who will discuss why investors should be in this enduring asset class and how they can ride this resurgence in the settlement market.

“As investors begin to revisit life settlements as a viable alternative that offers attractive, uncorrelated investment returns, they need the information and access to experts that our annual conference provides,” says Darwin Bayston, Executive Director of the Life Insurance Settlement Association based in Orlando, Fla. LISA is the premier settlement association, representing over 80 percent of all life settlement business licensees. LISA members hold over 750 provider life settlement licenses nationwide.

“The conference will also provide ample opportunity for investors to meet and build business contacts in a collegial setting with members of the life settlement industry,” Will Menezes, LISA’s Business Manager notes.

The event will kick off with the industry’s largest networking reception on May 4^th, followed by two days of sessions examining life settlements, its components and attributes, trends, industry practices among other pressing topics. Keynote Speakers US. Senator Robert P. Casey, Jr. and James J. Donelon, Louisiana Insurance Commissioner and Vice President of the National Association of Insurance Commissioners, will take center stage on the first day of sessions.

Interested parties can view the full agenda and register by visiting LISA’s website at www.thevoiceoftheindustry.com or by calling LISA at 407-894-3797.

About LISA
LISA’s mission is to promote the development, integrity and reputation of the life settlement industry and to promote a competitive market for the people it serves.

Commentary by Michael Abraham:

LISA looks a lot leaner and fitter these days.  This conference was definitely more appealing than previous ones.  The new committee looks strong and hopefully they will recognise the need to create a more marketing led approach to the industry.  It’s ok all these brokers and agents voting for a regulation and compliance led organisation but if we don’t sell the product there will be a smaller and smaller industry needing to comply!

Only problem – no salesmen on the committee – lots of lawyers though!

http://www.marketwire.com/press-release/life-settlement-association-hosts-conference-to-a-resurging-asset-class-1504155.htm

Author: David Martin

A lot of investors are investing in investment policies that are of great help to them . If you also are looking for some superior and beneficial investment policy where you can make vast proceeds on your investments, then life settlement investment funds is the correct investment policy for you. Life settlements are now playing a more significant role as a part of a diversified portfolio.

It’s been almost 3 to 4 decades that life settlements have assisted numerous massive depositors to earn good profits on their investments made. However, earlier this investment policy was meant for high profile people or huge business entities were able to enjoy the benefits of this plan. Still today, even individual investors can enjoy the advantage of life settlement investment fund where you need not buy the entire life settlement at one time, you can purchase different plans in small parts. This also saves you from the high risk on investment in single policy, provided you are investing in the right company.

The companies producing life settlement investment funds sign a contract with the policy customers after the transaction is complete and closes. There is a written agreement between the investor and the provider where the investor agrees to provide the sufficient amount of fund to purchase the policy. This denotes that the investor is solely responsible for the fiscal transaction yet in specific cases, the provider acts on behalf of the depositor and invests his personal income to acquire the life settlement investment policy for its portfolio.

Hedge funds are the popular life settlement investment funds that are commonly purchased by several investors. The US investment corporations provide great concessions and different incentive schemes to elders who purchase the policy and the corporation collects the amount of the policy after the policy owner dies. Other popular life settlement funds are the Global Macro Hedge funds. The advisor of the company foresees the global overall monetary changes and assists them get profits by laying a bet on them. The other profitable fund is the Multi strategy hedge fund where the organizers use several effective strategies to earn profit from the assets that are pooled by several other investors. Green hedge funds, Event driven hedge funds and the African hedge funds are some different kind of investment funds that might prove to be beneficial to the financiers.

Due to the rising financial constraints in the financial market, life settlement funds are the best way to earn returns on investments, where most of them offer greater than average returns. Due to several other plans, the risk is somewhat less because the depositor is able to vary the threat and income during the investment period. You will find numerous banks and authorized lenders from where you can purchase these life settlement policies. However, before purchasing the scheme, it is important for the investor to understand the fees and charges which are stated by any economic organization supplying their financial products. The greater the investment the greater is the risk involved, so it is recommended to invest in some reliable product that will surely yield profits in future.

Commentary by Michael Abraham:

this is really a clumsy article where the point gets somewhat lost but all in all I have to agree’ life settlements are good’,  in fact, ‘now life settlements are legal’, to paraphrase Gordon Gekko!

Originally Posted on11 January 2011

If there ever is a way to make a buck somehow, put your (theoretical) money on someone uncovering it and using it to their full advantage. Sometimes, people make money off of other people’s deaths too. I am not talking about something morbid like assassinations either; I am simply talking about those dealing in life settlements. Sometimes referred to as viatical settlements, these life settlements are essentially a gamble on death at its basest. Here’s why I say so; life settlements means a life insurance policy is sold to someone for less than its value and the buyer becomes the beneficiary. And so, the buyer then waits for the policy holder to pass away, in which case he will collect the money due to him. It’s quite morbid, actually.

Of course, this isn’t a topic everyone can write about or read about, but it does serve its purpose at times. Let’s try and be a bit objective and look at this from the point of view of both the seller of the policy (or the policy holder) and the buyer who will be the beneficiary. Now, more often than not these policies will involve the sale of a policy of very high face value, something in the range of $250,000 or even more. But there is a twist to be had in the tale. The policy holders that do sell their life insurance policies often are on death’s doorstep. Think of someone afflicted by a terminal illness or someone who is elderly and whose health is ailing.

It is always necessity that is the mother of invention, and it is necessity that has created this proxy market of life settlements. The people selling these life settlements have a life expectancy of two years or less. The whole idea of this marketplace was born when AIDS sprung to prominence in the 1980’s. These AIDS patients, knowing that they were running on borrowed time, sold off their life insurance. They did this in order to get the money they needed for medical bills that were always mounting. And from there the market spread to other terminal illnesses. It is a bit morose, but it is how life settlements came about.

Commentary by Michael Abraham:

I am just going to object to the first two sentences as I have not read any further! Who makes money on others’ deaths apart from undertakers, etc.?  Life insurance companies base their  whole operations on judging death rates and much of their profits come from people who die early.  What is an annuity rate if not a bet on death? Really, what nonsense!

• Story by: Cara Waters
• Magazine: FTAdviser
• Published Wednesday , April 13, 2011

A life settlement firm has falsely claimed “approval” from the Financial Services Authority (FSA) in correspondence with financial advisers and marketing literature.

A life settlements fund has been erroneously described as being “approved” by the FSA in correspondence with advisers and in advertising literature, the fund’s distributor has confirmed.

Simon Cooper, a broker at the investment house Earlmont, sent emails to financial advisers saying: “Dear investment professional, I am delighted to introduce to you a new life settlement offering that has been approved by the FSA and will soon be open for UK investors. Please contact me if you would like further information on the HC I Life Settlement fund.”

The website for LS Acquisitions, the United States-based operator of the fund, refers to “authorisation” by the FSA but then claims this authorisation amounts to “approval”.

The website states: “With the successful regulatory authorization and launch of the Strategic Life Settlement Fund, LS Acquisitions is pleased to announce that the HC I Life Settlement Fund, a UK feeder fund into the Strategic Life Settlement Fund (the Master Fund), was formally authorized by the FSA on February 28th 2011.

“This approval has been well received in the UK and opens up the opportunity for consistent subscriptions from residents from the UK being able to take advantage of the tax benefits afforded due to the Dublin registration of the master fund.”

Huet Capital, the authorised corporate director of the fund, also published a press release stating that “regulatory approval” had been received from the FSA for the fund.

The release said: “Huet Capital Ltd is pleased to announce that regulatory approval has been received from the Financial Services Authority for The HC I Life Settlement Fund, a Qualified Investor Scheme.”

The distributor of the fund, UK Innovative Financial Designs, confirmed the fund did not have FSA approval and said the use of the word approval was an error.

Jane Berntsen, marketing director for UK Innovative Financial Designs said: “This is a typing error – wrong use of word should definitely have read authorisation not approval.”

A spokesperson for the FSA confirmed HC was authorised rather than “approved” by the regulator.

Joseph Eyre, media relations manager at the FSA said: “The FSA has authorised the HC I Life Settlement Fund to operate as a QIS.

“QIS are authorised funds which may only be sold to certain categories of investors and are not marketed to retail investors. The FSA has verified that the proposal complies with the QIS rules.”

Jeremy Brettell, chief executive of life settlement product provider SL Investment management, said: “It sounds confusing as the FSA does not approve funds so it would be unreasonable to claim the life settlement fund was approved.”

Mr Brettell said he was also “slightly concerned” about the reference on the LS Acquistions website to sales to “residents of the UK”, which implied sales of the fund to a retail market via IFAs, something the FSA is uncomfortable with.

LS Acquisitions was not available for comment.

Commentary by Michael Abraham : as this fund is being trumpeted as the ‘best thing since sliced bread’ management really need to beware such statements from their salesmen and should stop criticising other funds in particular, they only damage the industry in general.  The ‘main man’ should know better, he has after all been this way before!

http://www.ftadviser.com/FTAdviser/Investments/News/article/20110413/1d5e8bfc-651e-11e0-a63e-00144f2af8e8/Life-settlement-firm-falsely-claims-FSA-approval.jsp