The European Life Settlement Association (ELSA) today publishes “An Approach for Estimating Gross Market Return for Life Settlements”, available on its website at www.elsa-sls.org/resources/other-documents. Authored by ELSA based on data provided by Fasano Associates and AA-Partners, the paper estimates the gross return of a typical life settlement policy in today’s market using actual mortality experience rather than life expectancy (LE) estimates, and presents additional stress tests and sensitivities around this key result.
ELSA also welcomes the publication by the University of St. Gallen of “Life Settlement Funds: Current Valuation Practices and Areas for Improvement”, available via ELSA’s website or directly at http://www.ivw.unisg.ch/de/Forschung/Grundlagenforschung/Working+Papers. This detailed study compares the valuation of eleven open-ended life settlement funds with recent secondary and tertiary policy sale prices and, while acknowledging the limitations of the analysis, finds that a number of the funds are seemingly substantially overvalued relative to these prices.
Simon Erritt, ELSA Chair, said; “Accurate pricing and valuation are critical to the success of any life settlement investment, and to the long-term development of the industry itself. Investors and fund managers who take advantage of the mortality and market data increasingly available to them will be the winners in this asset class; building robust models, making informed purchasing decisions and maintaining reasonable, defensible valuations.”