ELSA RESPONDS TO FSA CONSULTATION WITH ROBUST DEFENcE OF LIFE SETTLEMENTS The European Life Settlement Association published today, 6th February, its detailed response to the FSA's proposed ban of retail Traded Life Policy Investments (TLPI's).
The publication of ELSA's robust defence of life settlements as an asset class follows the delegation, led by Anna M. Bailey, ELSA Chair, which met with the FSA on 5th January.
In a statement issued today Anna M. Bailey said:
"We recommended that the FSA take a thorough approach to understanding TLPIs and proposing appropriate protections for retail investors. ELSA commented that the FSA’s November 2011 proposed guidance recommending a ban of marketing TLPIs to retail investors would, if adopted, have negative consequences beyond retail investors and perhaps in other markets within the United Kingdom and beyond. ELSA recommended that the FSA work with companies in the industry to propose targeted regulations to protect retail investors. ELSA also requested that the FSA extend the deadline for the consultation.”
In the meeting attended by top FSA staff, ELSA made clear their concern that the proposed ban of retail marketing of TLPI's was unprecedented and has seriously damaged the reputation of the entire asset class and could have other unintended repercussions. Further, the proposed ban appears to set a dangerous precedent for other investments and should be of concern to the entire UK and European financial services industries.
ELSA had previously invited Peter Smith of the FSA to speak at the ELSA Trade Mission in February 2010 and that, subsequently ELSA took into consideration Mr. Smiths concerns when preparing its Code of Practice to encourage transparency for investors and accountability for promoters. ELSA’s hope is there will be closer communication between the FSA and ELSA.
"ELSA's major concern is that the FSA had not sufficiently consulted with industry participants before announcing an unprecedented warning. ELSA objects to the FSA’s misuse of the word of ‘toxic’ to describe an asset class that provides tremendous benefits to consumers and is an attractive and sound asset for many investors worldwide. ELSA renewed its commitment to work with the FSA to develop strong investor protection and to improve communications with the FSA to ensure that reasonable regulations are adopted that permit the industry to continue to grow and simultaneously address the FSA concerns.”
NOTES TO EDITORS
ABOUT LIFE SETTLEMENTS
Life settlements are the sale of a life insurance policy by its owner to a purchaser that pays the owner a cash settlement. As an alternative to the lapse or surrender of a life insurance policy American policy owners have the right to sell their policies and receive a market value for their property. Life settlements are regulated in 40 of the United States, covering almost 90 percent of the US population.
According to a 2010 US government report on life settlements, policy owners entering into a life settlement received $5.62 billion more than they would have received from their life insurer for the years 2006-2009. The report also estimated that the life settlement market grew from $200 million in 1998 to a between $5.5 and nearly $13 billion in the years 2006-2009. Today, the life settlement market today is estimated at between $4-7 billion.
A 2011 Conning Research & Consulting report, entitled “Life Settlements: An Asset Class Resets”, while detailing the risks and past performance of life settlement investments stated that “[a]s the life settlement market reboots, investors will continue to find an opportunity to make returns that are higher than other fixed income investments” and pointed out that investors “will find clearer, and more stable, regulation” and “a legal landscape that has seen several recent cases that strengthened their ability to receive death benefits.”
ABOUT ELSA
The European Life Settlement Association (ELSA) was founded in 2009 to set standards for the European life settlement industry. We represent European funding sources, service providers and intermediaries in the Life Settlement market who are looking to promote transparency by providing accurate, authoritative information to retail and institutional investors, regulatory bodies and the media. Our focus is on the promotion of best practice and the positive development of the European Life Settlement industry’s reputation amongst all stakeholders. We encourage fair competition and investor protection within the European market.
For further information please contact:
Anna M. Bailey
ELSA Chair
E: ABailey@mlflexserv.com
T: +1 240 333 7366
Michael Fugler
ELSA Deputy Chair
E: michael@welcomelife.com
T: +1 917 834 7250
Paul Winner
ELSA Director
E: paul@elsa-sls.org
T: +44 (0)798 416 0102
W: www.elsa-sls.org