Industry Overview
"The holders of life insurance policies who sold their policies in 2002 received $242 million that would have been forfeited to insurance companies."Source: The Wharton School of Business at the University of Pennsylvania. "The Benefits of a Secondary Market for Life Insurance Policies," 2002.
"Categorized by some as 'a sleeping giant', the secondary market for life insurance policies has grown from an estimated $50 million in 1990 to estimates that exceed $134 billion today."Source: On Wall Street, Nov. 2002.
"After savings accounts and government bonds, life insurance may be the most respectable of investments due to the new secondary market for life insurance policies."Source: The Economist, May 2003.
"In 1998 the 40 to 50 mostly small companies that made up the industry exchanged about $1 billion in life insurance policies, up from just $50 million in 1991. Now, the industry is moving to extend the marketing of Viatical settlements to healthy seniors through so-called 'life settlements', a vast market potentially worth $108 billion. Many viatical insiders believe that eventually Wall Street companies will sell shares in large pools of 'used' insurance policies."Source: Conning & Co., 1998.
The idea of a life insurance policy as a financial asset that could be transferred for a cash payment had taken hold and a new industry was born. The life settlement industry's basic premise - the consumer has a right to sell unwanted or unneeded life insurance - has been validated by the spectacular growth of the U.S. market.
This growth is mainly driven by the large numbers of baby boomers that are becoming senior citizens. Baby boomers are constantly changing their estate-planning needs. More important, they are beginning to realize that these insurance policies can be sold on a secondary market as financial instruments.
Market Opportunity
The U.S. secondary market for life insurance policies has experienced phenomenal growth over the past several years. While the face-value of life settlements policies accounted for around $50 million in 1990, that figure catapulted nearly sixty fold to approximately $3 billion in 1999, according to some estimates.
Estimates for 2005 are between $6 and $8 billion. Within ten years, estimates for the face value of life settlement policies sold in the United States range anywhere from $10 billion to $45 billion.