Wagering on Death on the Increase
In a recent National Underwriter article entitled "Exec: Settlement Appeal is Growing" by Trevor Thomas, he reports that the liquidity crunch has reduced the available capital for buying life settlements, but he also reports that institutional investors are considering that asset class.
That is deeply troubling to me: It appears to be blatant wagering on the death of others as a desirable "asset class" because returns are so bad everywhere else!
Thomas reported that Larry Simon, president of Life Settlement Solutions Inc. of San Diego, gave that disturbing assessment in a comment on the state of the market. The same turbulent conditions that are affecting liquidity are causing investors to explore investment alternatives, including life settlements, Simon says.
Many of the investors are attracted to the idea of getting returns backed by the credit ratings of the insurers issuing the underlying insurance policies, Simon says. The investors exploring life settlement options include “household-name investment banks, hedge funds, pension plans, major foundations and endowments, and insurers,” Simon says. He goes on to indicate that "in the short term, the liquidity crunch has "created one of the best buying opportunities for investors that this industry has experienced."
A secondary market in life settlements is generally disturbing for many reasons. In the current environment when so many are losing their jobs and therefore their health insurance, and the rates of depression and anxiety are skyrocketing as we all have so many more worries, many who are sick would seem to be more likely to die sooner than they might in good times. Many Americans may no longer be able to afford the medications that have kept them healthy and alive. And to think that those tragedies could be the subject of a bet that institutional investors profit from is more than disturbing to me - it is appalling!
