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About Reverse-Life Insurance® > Reverse-Life Insurance® Securization
Reserve-Life Insurance Securitization
A New Asset Class. The emergence of life settlements as an asset class has brought about the development of securitization of the vehicle. Securitization provides investors with the opportunity to gain rights to the future death benefit of a life settlement contract, while circumventing the idiosyncrasies that come with purchasing the asset in its raw form.
Securitization. By definition, securitization is the process of repackaging the cash flows corresponding to insurance premium payments and death benefit into a security. These securities can take the form of private placements, or rated securities, such as bonds collateralized by life settlement contracts.
Significant Advantages. The asset class holds significant advantages because in a general sense, it is not prone to interest rate risk, stock market fluctuations, or systemic factors. In general, the risk of investing in life settlement contracts is longevity risk, which is the risk of the policy failing to mature at the expected future date.
Life Settlement Securitization Structure. The life settlement securitization structure seeks to distill this risk by providing a wide range of conservative policy maturity estimates from leading third-party underwriters. Historical returns on life settlement policies are between 15%-20% per annum. The unique properties of this asset class makes it an important diversification tool, which should be explored in any asset allocation plan.
