The life settlement market enables people to sell their life insurance policies to investors at a higher cash value than they would otherwise receive from insurance companies. An investor acquiring the life insurance policy will continue to pay the premiums until the death of the insured. The insurance company will then pay the face value. While the life settlement industry is global, LSA’s focus remains on American policy owners.
There are a number of reasons why a policy owner would want to sell their life insurance, but the most common reasons are that:
- The premiums are no longer affordable to the policy owner
- The policy owner needs to fund medical care
- Lifestyle needs have changed
In the US, life insurance policies are deemed as private property and can be sold. A legal precedent was established in the Grigsby v. Russell decision in 1911 which instituted that life insurance policies can be assigned at the will of the owner. The case reached the U.S Supreme Court where Justice Oliver Wendell Holmes Jr. delivered the opinion of the Court:
“So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner’s hands.”
This legal precedent has been reinforced since 1911 and in 1996 the Health Insurance Portability and Accountability Act (HIPAA) was enacted by the United States Congress and signed by President Bill Clinton. HIPAA enabled the owner or the beneficiary of a life insurance policy to transfer the ownership or beneficial interest of a life insurance policy to a third party.
The life settlement market is regulated in most States and each State has its own Insurance Commission which regulates life insurance of its citizens. The life settlements market is maturing and selling life insurance policies is becoming a practical solution to release funds to the owner. The level of regulation is improving and increasing which is beneficial to the life settlements market. LSA supports and welcomes these regulatory developments which will promote and uphold the reputation of the life settlement industry.
Subject to applicable law, all Shares of a given class are entitled to participate equally in dividends derived from funds that are legally available for the distribution of dividends when, as and if declared by the Shareholders at a meeting of the Company and/or the Board.
The Company will only pay dividends on the Ordinary Shares to the extent that it has sufficient financial resources available for the purpose in accordance with the Act.
The Company has no stated dividend target. The Company aims to distribute a substantial portion of its funds derived from its operations in respect of a Share Class as dividends or through share buy-backs or tender offers to its Shareholders of that Share Class. There can be no assurance that the Company will be able to achieve this aim.
In accordance with regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011, the Company will not (except to the extent permitted by those regulations) retain more than 15 per cent of its income (as calculated for UK tax purposes) in respect of any accounting period.
The primary market for life settlements is the market in which the holder of a life policy transacts that policy for the first time to a purchaser, consenting to cede their total interest in the policy to the purchaser.
The secondary market is the market in which policies acquired in the primary market are transacted again with secondary purchasers.
LSA operates in the secondary market.