Author: Beat Hess and Gabriel Maeder

The concept of a life settlement investment is quite simple: the collected death benefits must exceed the cost (purchase price, premium payments, fees, etc.). A positive balance pays back to investors their initial investment and delivers a positive return once the initial investment has been paid off. The dimensions of life settlements – life expectancy, age of insured, gender, projected premium streams – are unlike any other asset, so constructing a life settlement portfolio comes with a different set of challenges than other asset classes. Figure 1 below shows a section of life settlement deal flow. The age of the…