Andrea Hoch, Senior Director of Investor Relations at AIR Asset Management, joined Keith Black, Managing Director of RIA Channel, to discuss life settlements as an impact investment.
Seniors lack an awareness of the life settlement market, as over 9 million life insurance policies lapse or are surrendered annually. Life settlements, the transfer of a life insurance policy from the insured to investors, have a positive impact on the quality of life of seniors. The Life Insurance Settlements Association notes its members paid $842 million to policyholders in 2023 for $4.67 billion in policy face value. This amount was $707 million more than policyholders would have received if their policies had lapsed or been surrendered. In addition to receiving greater value than having surrendered the policies, seniors participating in the life settlements market are relieved of the obligation to pay continued premiums on their life insurance policy, freeing cash flow for other spending needs. The first life settlement in 1911 resulted in a Supreme Court decision that determined that life insurance was property that could be bought and sold. The industry is highly regulated, with 43 states having life settlement regulations in place to protect consumers.
The life settlements market has the potential for substantial growth, as 10,000 Americans turn 65 each day, and $20 trillion of life insurance policies are in force in the US.
AIR Asset Management has a portfolio of 800 life insurance policies with an aggregate death benefit of $1.3 billion. These policies are highly diversified across carriers, gender, geography, health conditions, smokers, and non-smokers. Insured lives in the portfolio have a weighted average age of 85 years and a weighted average life expectancy of 43 months. 250 of those policies, with an aggregate death benefit of $500 million, cover insured lives aged 92 and older.
AIR Asset Management takes a multi-strategy approach to longevity investing by adding life-contingent annuities and private credit to the portfolio. The portfolio has experienced returns with low volatility and low correlation to traditional asset markets.
Resources:
2023 LISA Annual Market Data Collection Survey Results
Fostering Financial Independence for Seniors with Life Settlements