Steven Shapiro, Q Capital’s President and CEO, will be presenting at the National Underwriter Company’s 3rd Annual Life Settlement Summit in Miami, Florida.  The presentation will take place on March 12 and will focus on the changing role of life settlement providers.  Specifically, the session will cover the challenges that life settlement providers have faced in the last year and a half as the credit markets dried up and life expectancy tables were significantly changed.  While the economy has started to slowly recover, liquidity is still an issue and fraud concerns persist.  In this context, life settlement providers have had to adapt to the market conditions and requirements of life settlement investors.  Q Capital, as a leader in the life settlement industry, has particular expertise on this topic.  Q Capital is a licensed life settlement provider in 29 states and actively purchases life insurance policies in 46 states and DC.  In addition to being a life settlement provider, Q Capital is an investor, servicer, and independent valuation agent.

The Life Settlement Summit is a two-day event taking place on March 11-12.  Mr. Shapiro is a member of the Life Settlement Summit Advisory Board, helping to define the agenda for the conference to ensure that the content is fresh and addresses the most relevant topics in the marketplace.  

A discussion of what the industry needs to move ahead was the focus of the final day of the Life Settlement Trade Mission here.

The life settlement market is still very much of a niche investment, said Jean-Paul Messerli, a partner with Fundabilis GmbH who started off Mission’s morning of sessions co-sponsored by the Life Insurance Settlement Association, Orlando, Fla. and the European Life Settlement Association, London.

In order for the market to grow, he continued, there needs to be a central marketplace where providers and institutions can buy and sell policies. What is also needed, Messerli added, is to increase transparency and standardization of both business and regulatory practices. Once there is improvement in these areas, then liquidity will increase, a key to industry growth, according to Messerli.

The lack of liquidity was also noted by Larry Simon, CEO, president and sole director for Life Settlement Solutions, Inc. He said that it is important that the three associations represented at the Mission, BVZL, ELSA and LISA, work together to get a more standardized document set and to create a trading platform in order to ensure more liquidity going forward. With a coordinated effort, standardization of documents can happen, although it might take a year or two to accomplish, Simon added.

Bryan Freeman, president of Habersham Funding LLC and a chairman of the Mission, noted the importance of technology and how it has enabled providers to build in best practices into their systems and alert companies of the frequency of events as well as rare events. If a rare circumstance arises, then the provider needs to know about it so if it resurfaces, it can be easily identified, he added.

Currently systems can track policies, ensure that premiums as well as policy benefits are paid, and in many cases can run analytics to keep track of what is happening to portfolios or even individual policies, Freeman said. They can also alert providers if new HIPAA notices or LEs are needed, he added.

Freeman said that many are now structuring projects ranging from golf courses to real estate use life settlements as collateral and that will continue. He noted that a lot has been made lately over the possibility of securitization in the United States. But, he says “I don’t believe it will get a lot of traction [in the near term.] It may get some.” But in the medium term, he said that there may be some securitization of life settlements as rating agencies get more comfortable with the process. The industry will also see more realistic returns in the 8-11% range going forward, Freeman predicted.

Dan Sheedy, director of business development with MLF Lexserv, said that he thinks securitization is coming and is a lot closer than people may think, advising attendees that it is worth looking at guidelines put out by the rating agency A.M. Best Co.

Darryl Glatthorn, head of strategic finance with Caldwell Life Strategies, sees a new approach to structuring investments developing, one in which there would be a small group of players who in effect create an investment club. The players, he continued, would be better equipped to handle a liquidity crisis, rather than having a fund with hundreds of investors with unknown tolerance to illiquidity problems that could create an exposure to a run on the bank.

And, Glatthorn added, as greater transparency develops, “The days of the Wild West will be over. Our market will become efficient and as it does, it will trade closer to the risk-free rate.”

As the discussion of LEs continues, a diversity of opinion among providers and a “vigorous discussion” among industry participants will only make the industry stronger, according to Vince Granieri, chief actuary and CFO with 21st Services, LLC. LEs are not single numbers, but rather a distribution of cohorts of 1,000 individuals and of patterns over time, he added. Granieri noted that the data the industry is using is becoming better, as indicated by the life settlement’s upcoming representation on a panel on senior longevity during the Society of Actuaries’ Living to 100 Symposium to be held on Jan. 5-7, 2011.

What is “looming over the entire industry” right now is how to address treatment of life settlements by the IRS, according to Steven Huttler, a partner with the law firm of Sadis & Goldberg. In particular, there is the potential for a 30% withholding tax on life settlements. However, he added, with proper structuring of transactions with European investors, this major obstacle will be manageable.

Michael Fugler, head of global capital markets with Welcome Life Financial Group, and Mark Venn, managing director and CEO of ClearLife Ltd., picked up on the theme of technology touched on by Habersham’s Freeman. Fugler told Mission attendees that today life settlement companies need a Web-based operation that is a security hosted platform in which client information is encrypted and viewing rights assigned. Transparency is also needed where there is real time data and documents so there can be more team collaboration, he added. Viewers should be able to look at a screen and see all pertinent information including minimum and maximum face values, LEs, and other relevant data, Fugler said.

ClearLife’s Venn said that technology can help capture inconsistencies in data early on in the process and can help companies conform with data protection laws established in the EU. What it is important to look for in any provider of technology Venn explained, is experience, an appreciation of the risks involved, integration, independence and an empathy or understanding of some of the pressures their clients may face.
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A Trade Mission daily report released on February 26 should have cited Jeff Mulholland, a consultant with Fasano Associates, as saying that he would advocate for finding out why those extremes [outliers in LEs] exist. The client should always be provided with all LEs, he added. “It is important to have that look [at all LEs] because investors should no longer leave it to providers.”

Source: Jim Connolly, Managing Editor, Life Settlement Review