Sami Vukelj, an expert in private credit firms and the secondary market for life insurance policies, discusses the intriguing topic of life settlements. They explore the process of selling life insurance policies, the controversy surrounding life settlements, and the metrics to consider when analyzing life insurance portfolios. Tune in to learn more about this morbid yet fascinating segment of specialty finance.
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Quick takeaways
The life settlements industry involves selling active life insurance policies to big investment firms, providing liquidity options for seniors who may need extra cash or prefer to use their money while alive.
Big investment firms like Blackstone, Apollo, and KKR are involved in buying bundled life insurance policies from brokerage firms, which become part of their investment portfolios.
Deep dives
What is the life settlements industry?
The life settlements industry refers to the secondary market for life insurance policies. It involves selling active life insurance policies to someone for a multiple of its cash value component. Instead of the death benefit going to the beneficiaries, it goes to the buyer of the policy. Big investment firms like Blackstone, Apollo, and KKR are involved in buying these policies.
How do life insurance policies end up in investment portfolios?
Seniors who want to sell their life insurance policies can do so by contacting brokerage firms or life settlement brokers. These brokers then bundle the policies by the hundreds or thousands and sell them to big investment firms. Some popular brokerage firms include Coventry and Abacus. These bundled policies become part of the investment portfolios of firms like Blackstone, Apollo, and KKR.
Views and considerations in the life settlements industry
The life settlements industry has a range of views and considerations. While some may find it distasteful, others argue that it offers a liquidity option for seniors who may need the extra cash or prefer to use their money while they're alive. There is a market demand for life settlements, as some seniors no longer see the need for the death benefit payout or may have financial needs. However, there has been regulatory scrutiny surrounding the industry's practices.
Life insurance, on the face of it, is not the most exciting industry. The secondary market for life insurance policies, however, presents the perfect subject for a spooky Halloween special edition of Cloud 9fin.
On this week’s episode, Will Caiger-Smith quizzes Sami Vukelj — who explains how and why private credit firms are buying life insurance portfolios, and tackles some of the awkwardness involved in this morbid segment of specialty finance.
While the trade, which revolves around the ‘death benefit’ payout, leaves a bad taste in some people’s mouths. On the flip side, why shouldn’t you be entitled to the cash value of your literal life while you can still spend it?
Tune in to learn everything you need to know about the death capital markets.
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