New platform pleads for life settlement standards
NETHERLANDS - A new Dutch platform for life settlement providers and investors has called for internal regulation and professional standards for the emerging asset class.
The Organisation of Experts in Life Settlements Institute (ELSI), launched yesterday, says interest in securitised life insurance policies, or life-settlements, is growing, particularly among institutional investors who want to diversify their portfolios, though more communication is needed.
Chairman and founding member Ronald van de Langenberg argues because of the often negative portrayal of the asset class, there is a danger the real risks remain hidden to investors.
"With real estate, for instance, everybody knows the market goes through certain developments," argued Van de Langenberg, though adding the aspects of importance to life settlement investments are far less well known.
The organisation wants to breathe life into a of set professional standards, and would also like to see internal regulation among life settlement providers.
The organisation's members so far are providers, advisers, accountants and lawyers, though Van de Langenberg would like to see investors, such as pension funds and other institutional investors, join the mix as well.
Van de Langenberg has also had contact with MN Services and Cordares to join the association. They have been reluctant so far, but he hopes as the association further develops its standards, they might reconsider their position.
In the constant search for diversification via uncorrelated asset classes, more Dutch pension funds are turning to life insurance policies.
Earlier this year, PME, the €20.5bn fund for Dutch metalworkers, said it was to put up to €400m - or 2% of its total assets - into securitised life insurance policies or life settlements.
Life settlements are insurance policies that are surrendered early by their holders to third parties. So far hedge funds have been the main investors in these asset class but European and US institutional investors are catching up.
According to figures collected by research agency Sanford C. Bernstein in New York, the market issuance of life settlements rose by $10bn (€7.4bn) between 2004 and 2005 to $23bn. Annualised returns lie somewhere between 8% to 11%.
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