Many life settlement hedge fund managers which establish life settlement hedge funds come from the insurance industry (although we have dealt with managers who are also registered as investment advisors). Accordingly, many managers are surprised when we discuss the issue of potential investment advisory registration. The central question is whether life settlements are securities. Continue reading
Over the past few years life settlements have become a more attractive investment opportunity and there is an increase in the amount of hedge funds which are being formed to invest in various life settlement strategies. This article will discuss life settlements and will introduce some of the issues which hedge fund managers should discuss with their attorney if they want to start a life settlement hedge fund.
From Viaticals to Life Settlements and Premium Finance
Life Settlements are the younger sibling to the Viatical industry which was popular in the 1980’s with regard to AIDS patients (see SEC description of Viatical’s below). A “life settlement” usually refers to a secondary market transaction on an insurance policy. Typically an insured will sell its insurance policy to a third party (the investor) who will pay the insured more than the cash surrender value of the policy, but less than the death benefit. The investor will then be liable for the premium payments and will receive the death benefit upon the death of the insured. Continue reading
This release is from the Washington State Department of Financial Institutions.
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In 1999, Securities Administrator Deborah Bortner sent out a letter to insurance agents in the State of Washington regarding the applicability of the state securities laws to the offer and sale of viatical settlement contracts to investors. Under such a contract, a terminally ill person sells the death benefit in his or her life insurance policy in return for cash that can be used for current expenses. Continue reading