Brokers

Financial advisors who choose not to submit cases directly to a settlement provider may opt to work

through a life settlement broker. Life settlement brokers are intermediaries who bring together

policyowners who wish to sell a policy and providers seeking to purchase them. Brokers, in exchange for

a fee, will shop a policy to multiple providers, much as a real estate broker solicits multiple offers

for one’s home. While it is the broker's duty to collect bids, it is still incumbent on the advisor to

help the client evaluate the offers against a number of criteria including offer price, stability of

funding, privacy provisions, net yield after commissions, and more. Compensation arrangements vary

significantly and should be fully disclosed and understood to determine if engaging a broker will

benefit the client. In many states, brokers must be licensed to do business in that state.

Investors / Risk takers

Life settlement investors are known as financing entities because they are providing the capital or

financing for life settlement transactions (the purchase of a life insurance policy). Life settlement

investors may use their own capital to purchase the policies or may raise the capital from a wide range

of investors through a variety of structures. The life settlement provider is the entity that enters

into the transaction with the policyowner and pays the policyowner when the life settlement transaction

closes. In most cases, the life settlement provider has a written agreement with the life settlement

investor to provide the life settlement provider with the funds needed to acquire the policy. In this

scenario, the life settlement investor is effectively the ultimate funder of the secondary market

transaction. However, in some life settlement transactions, the life settlement provider is also the

investor; the provider uses its own capital to purchase the policy for its own portfolio.

Life settlement investments are not typically suitable for individual investors. Risks are associated

with life settlement investments that individual investors may not recognize and that unscrupulous

promoters may misrepresent or fail to disclose. For example, funds invested in life settlement

investments are usually not accessible on the demand of the investor, as are investments in many other

types of securities, such as mutual funds. These factors and others render this type of investment

unsuitable for the financial needs and interests of the average individual investor. For this reason,

the norm today, especially among reputable life settlement providers, is to obtain capital only from

life settlement investors who are established and credible institutional sources of capital rather than

individual sources of capital.

In most cases, a life settlement investor must be a qualified institutional buyer as defined in the

federal Securities Act of 1933. A qualified institutional buyer (QIB) is defined under Regulation D,

Rule 144A as an entity owning and investing large amounts of securities, with the threshold ranging from

$10 million to $100 million of securities not affiliated with the entity and dependent on the type of

entity. QIBs are eligible to participate in a restricted investment market known as the "Rule 144A

market" that is not available to the public because the issuer of the securities has chosen not to make

the required public disclosures or to register the securities. The purpose of the qualified

institutional buyer requirement in life settlements is to prevent unsophisticated or undercapitalized

investors from participating in—and potentially being harmed by—complicated life settlement

transactions.

Financial institutions meet the qualified institutional buyer test and are therefore suitable life

settlement purchasers. In addition, institutions have teams of experienced investment analysts and are

experts at managing investment risk; they can impose a “corporate governance” discipline on the life

settlement transaction process intended to minimize questionable market practices; and institutional

funding provides a high degree of consumer protection with regard to privacy and confidentiality (a

policyowner’s or insured’s personal information should never be in the hands of an individual investor.)

Other Involved Parties

Underwriters/Life Expectancy Providers - Provide life expectancy estimates on the insured for pricing

purposes. There are four major life expectancy providers, namely 21st Services, AVS, Fasano, and ISC

Services.

Some underwriters provide unreasonably short life expectancies by using base tables that are 5 years out

of date, ignoring future mortality improvements & current treatments Eg Statins and basing life

expectancies on life manuals which are conservative for mortality and not longevity risk. Others apply

actuarial analysis to the most recent available data as well as their own experience to develop their

base tables and underwriting manuals.

Providers who do not provide short life expectancies are shunned by originators whom are primarily

remunerated for volume. Providing more reasonable life expectancies does not inflate the apparent value

in these insurance policies. This results in fewer cases being written and less support from

originators.

There are no experience studies publically available which support the accuracy of any of the major life

settlements underwriters