How did the life settlement marketplace develop?
At the same time the viatical settlement business was unwinding, several large financial institutions and their actuaries realized that the purchase of non-viatical policies (where the insured has a life expectancy of more than 24 months) represented a viable business. Not surprisingly, in 2000 it was insurance holding companies like Berkshire Hathaway and AIG that pioneered the development of the life settlement business. Being insurance companies themselves, they realized that buying a policy on an insured with some health issues presented a good investment opportunity if you could establish a purchase price based upon sound actuarial and medical predictions of the insured’s probable life expectancy. Specialty insurance underwriting firms have developed that specialize in estimating life expectancy. These firms use a combination of specialized actuarial tables and up-to-date medical information about the insured to develop their life expectancy predictions.
