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Saturday October 06, 2007 12:00AM | Click here to visit original article.
So where do all these life settlements end up? Most of them end up in pools owned by large financial institutions and hedge funds. The firms monetize the policies and sell interests in the pools to the investors, which are usually even larger investment or pension funds. That is what happens most of the time.
There is a concern, however, that particular life settlement contracts could end up in the hands of seedy elements. Or as Steve Leimberg of http://leimberg.com puts it, "How well would you sleep at night knowing that your life insurance policy is owned by Tony Soprano, and his rate of return will depend on how quickly you die?"
Although having your life insurance ultimately purchased by a mobster is probably a longshot, it may not be worth the anguish to later find out that your life insurance policy that had been initially purchased by a Cayman hedge fund has since been sold to an obscure company in Colombia. With life settlements, there simply is no guarantee who will end up owning the policy, and that might disturb some.
Indeed, the historical background of the insurable interest laws goes back to what were known as the "death pools" of Victorian England. Then, bettors would speculate on when a particular person would die, and later started taking life insurance out on their lives without them knowing about it or giving their permission. When later the "accidental" death rates of such persons started to rise, the English Parliament basically forbid SOLI by requiring that the purchaser of a life insurance policy have a recognizable interest in the person being insured. By waiting the two years before buying the policy, the investors in life settlements skirt these rules but the underlying concerns are still there.
---Source: http://www.quatloos.com/life_settlement-life_settlements.htm
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65 Year Old Female
$15,000,000 Universal Life
$332,270 Surrender Value
Paid: $1,078,000
77 Year Old Female
$750,000 Universal Life
$102,287 Surrender Value
Paid: $137,000
80 Year Old Female
$400,000 Convertible Term Life
$0 Surrender Value
Paid: $68,000
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