Life Settlements

The US life settlement market is attractive to foreign investors for many reasons.

  • First, unlike the term156 and endowment157 products primarily offered to the secondary markets in the United Kingdom and Germany, the US life settlement market is largely made up of permanent policies158 (whole life and universal life).159
  • Second, in countries such as Canada, life settlements are largely banned within the provinces, so investors cross the border to participate.160
  • Third, if premiums are paid, there is a guaranteed payout because death is a certainty—the only unknown is when.

    Therefore, the life settlement market attracts investors beyond US borders, but the lives being gambled on are largely those of US citizens.

156. Term life insurance provides coverage for a certain period of time, normally between one and thirty years. Life Insurance Basics, INS. INFO. INST., http://www.iii.org/article/life-insurance-basics [https://perma.cc/S7RH-7BH3] (last
visited Feb. 22, 2016).
157. An endowment policy is an investment tool that also includes term life insurance. If the insured dies during the term, a death benefit is paid. Amy Fontinelle, The Pros Of An Endowment Life Insurance Policy, INVESTOPEDIA, http://www.investopedia.com/articles/pf/12/endowment_life_insurance.asp (last visited Feb. 22, 2016).
158. Permanent life insurance remains in force until the insured’s death if all premiums are paid. Life Insurance Basics, supra note 156.
159. The Secondary Markets for Life Insurance, supra note 143. Both whole life and universal life insurance is a type of permanent policy, but with universal life insurance the premiums are more flexible. Life Insurance Basics, supra note 156. As cash value accumulates in the policy, the policy owner has the option to reduce the premium payments as long as the interest earned on the cash value is sufficient. Id.
160. Perkins, supra note 155

2016 - AP - Life Insurance—Insurable Interest and The Freedom Of Contract: Why Medicaid Settlement Legislation Cracks the Foundation of the Life Insurance Industry, Heather Harris - 45p

  • 2009 0429 - GOV - Bettinhg on Death in the Settlement Market:  What's at Stake for Seniors? - [PDF-312p]
  • 2010 - SOA - Report of the Society of Actuaries Life Settlements Survey Subcommittee, Society of Actuaries - 36p

  • 2008 0411 - LC - American International Group, Inc., Plaintiff, V. Maurice R. Greenberg and Howard I. Smith - Transaction ID 19383511 - Case No. 769-VCS - First Amended Combined Complaint - Third Amended Consolidated Stockholders’ Derivative Complaint - 217p

    • 461. Life settlements are somewhat controversial in that they involve purchasing life insurance policies from sick and/or elderly people with short life expectancies – betting they will die sooner rather than later. As described in a article in the March 19, 2001 edition of Forbes entitled “Death Wish,” “[t]his is a pretty ghoulish way to make a buck, but as a cold-blooded investment it sounds good.”

    • 462. Maurice Greenberg was aware of the negative public relations that could result if AIG were to involve itself in the life settlements business as he enclosed the “Death Wish” article in a March 12, 2001 memo to David Fields with the note “[n]ot very attractive” and wrote in an April 16, 2001 memo to Fields that “[i]t seems to me that anybody doing anything in the field stands the risk of adverse PR . . . I am uneasy about this.”

  • 2008 0411 - LC - American International Group, Inc., Plaintiff, V. Maurice R. Greenberg and Howard I. Smith - Transaction ID 19383511 - Case No. 769-VCS - First Amended Combined Complaint - Third Amended Consolidated Stockholders’ Derivative Complaint - 217p