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What are the Different Types of Life Settlements?

Life Settlements

For investors seeking an uncorrelated alternative investment with low volatility and predictable returns, we believe there are few investments that deliver on this profile as well as life settlements.

Life settlements are investment vehicles where investors purchase life insurance policies on seniors with a life expectancy of 3 to 15 years for an amount higher than cash surrender value and less than the policy face amount. Investors receive a return based upon the price paid for the policy (inclusive of premiums) and the death benefit received.

Types of Life Settlements:

  • Viatical Settlements: a situation where the insured has a life expectancy of <2 years.

  • Life Settlements: a situation where the insured has a life expectancy of <20 years.

Transactions of Life Settlements:

  • Direct Purchases: require a large outlay of cash with expertise to buy the right policies.

  • Direct Fractional: larger policies are divided into smaller portions and sold individually to investors.

  • Life Settlements PE Fund: involves purchases of portions of a fund comprised of hundreds of policies.

Fund Structures:

  • Hedge Fund (open-end).

  • Private Equity Fund (closed-ended).

  • Hybrid Structure: mix of Hedge Fund and Private Equity Structure.

  • Debt Structure:

    • Pay out a variable coupon based on returns.

    • Pay out a yearly/quarterly fixed coupon after some time.

    • Pay out a yearly/quarterly coupon at the end

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Special Thanks to our Contributor

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RiverRock is a dedicated life settlements investment manager with over ten years of experience managing pooled investment funds investing in the secondary and tertiary markets for life insurance policies.

Hugh P. Tawney Director of Sales Office: +1 713.375.1307 Mobile: +1 410.952.2374

RiverRock is not affiliated with and does not endorse PrimeAlpha Insights.

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