Common Issues Q&A

Are Life Settlements similar to Viaticals?disclaimer

No. Life Settlements are the life policies of impaired seniors over the age of 65 who wish to sell unwanted or unneeded life insurance policies on the secondary market. Viaticals was a practice that focused on policies of the terminally ill.

For Life Settlements policy origination there are numerous reasons as to why senior individuals may look to sell on their policy:

Change in life circumstances
Change in estate planning
Excess cover through multiple policies
Change in financial needs
Better cover options become available

What alternatives do individuals have to selling their policy?

An individual may choose to let an unwanted policy lapse to avoid paying further premiums. By surrendering it to the insurer they may or may not receive a small surrender cash value in return. The alternative of selling a policy on the increasingly liquid and competitive secondary market allows the insured to receive a present value of the policy and an increased benefit in comparison to the alternatives.

What different ways are there of accessing the Life Settlement market?

Investors may consider accessing the Life Settlements market directly themselves through the purchase of a policy. The risk attached here is clear if they are not experts or are not receiving advice. Diversification is possible through investment in a Life Settlement fund which may hold a portfolio of policies. However, again investors should be careful when considering which manager to use as there are different origination methods, valuation processes and attitudes to risk. Wharton Advisors Corp. are able to offer a third way in the creation of a bespoke solution to meet the needs of the institutional investors in structure and profile.

What regulation is in place?

The longevity market is becoming more scrutinised as it grows and as more and more significant organisations start to participate. Investors should ensure that the policy origination is prudent and fair and that only policies from top-tier insurance companies are considered. Wharton Advisors Corp. work to ensure that the standards in this area are continually rising and improvements are made to ensure the requirements for institutional investors are met.

How accurate are valuations?

Managers may take different approaches to valuation based on whether they wish to be cautious or aggressive. Investors should ensure that they are fully cogniscent of the approach being taken before they consider investment. Valuations are made using sophisticated actuarial models and the experience of the organisation in this area becomes of great importance. Wharton Advisors Corp. have a tried and tested methodology and even overlay the quantitative assessment with an independent medical review.


Wharton Advisors Corp.

Wharton Advisors Corp.