Author: James Maxson

Most articles advocating in favor of life settlements1 do so with a hat tip toward compassion and fairness, but generally focus primarily on the economic benefits that a life settlement offers policy owners. Conversely, detractors of life settlements transactions frequently point to abuses, real and perceived, suffered by the sick and/or older individuals who are the primary sellers of life insurance policies. While there are reasonable bases for both positions, life settlements transactions present a person who no longer wants or needs their life insurance the opportunity to monetize an otherwise illiquid asset. While life settlements transactions undeniably benefit policy…

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In addition to the important diligence issues associated with the pricing and valuation of life settlements, life settlements have characteristics that make thorough legal due diligence particularly important. Unlike stocks or bonds, there are no widely accepted exchanges across which life settlements trade, nor are there regulatory agencies, such as the Securities Exchange Commission, that mandate standardized disclosures to investors in the asset class. Hence, transactions tend to occur on a one-off basis, and are frequently subject to information asymmetry between the seller and the purchaser, heightening the need for robust due diligence. Some of the issues associated with life…

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