Life settlement market
A policyholder sells a life policy to an investor, who pays the premiums and collects the benefit. The market rests on one principle: the policy is transferable property.
In 1911, in Grigsby v. Russell, the US Supreme Court, in an opinion by Justice Holmes, held that a life insurance policy is property its owner can assign like any other. The life settlement market still rests on that decision. A policyholder who no longer needs coverage can surrender it to the carrier for the cash surrender value, often small, or sell it to an investor for more. The buyer then pays the premiums and collects the death benefit. Returns depend on how long the insured lives. The investor holds longevity risk the same way an annuity writer does, on the opposite side from the company that issued the policy. The AIDS years showed what that means. Viatical settlements in the late 1980s bought policies from patients expected to die soon, and combination antiretroviral therapy in the mid-1990s extended lives that investors had priced as short. Two weak points remain. The selling insured is often under financial pressure, which is why states regulate the transaction. And the whole price hangs on life expectancy reports, and upward revisions to those reports have cost institutional funds heavily.
In 1911, in Grigsby v. Russell, the United States Supreme Court held that a life insurance policy is transferable property its holder may freely dispose of. The life settlement market rests on that decision.
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.