Three ESG-related issues in the US:
- There is a shortfall of retirement savings in the US.
- Due to the savings shortfall, seniors cannot access long-term care.
- Many permanent insurance policies issued in the US are structured so that premiums increase as the insured gets older – premiums become increasingly unaffordable as employment income reduces.
Monetising a life insurance policy which is no longer needed provides meaningful help to seniors who are struggling financially but not all seniors are aware of their options and of course some policies don’t have a surrender value. In 2020, 9.18 million policies lapsed for a total death benefit of $642 billion.
Where there is a cash surrender value, the typical route for a senior will be to take the contractual cash surrender value offered by the insurance company. However, according to a data collection survey conducted by the Life Insurance Settlement Association from members representing 95% of market share, in 2021 there were 3,000 policies sold into the life settlement market where the prices paid for the policies on average were 7.8x the contractual surrender value offered by the insurance companies.
Life settlements provide a real social benefit for consumers.
Life settlements are now highly regulated in the US and it is only “Licensed Providers” who are allowed to buy a policy directly from an insured. The regulations aim to protect the insured and his/her family and to ensure that the sales process is transparent and correct.
The insured receives a cash sum and the investor takes on the obligation to pay the premiums and will eventually collect the death benefit.
Life settlements provide a cash payout to the seniors and shift the burden of the insurance premium to life settlement investors. By investing in this asset class there is potential for:
- Retirees to use life settlement proceeds to replace pre-retirement income and help maintain a dignified standard of living.
- Frail and disabled persons can use the life settlement proceeds to pay for long-term skilled nursing, subsequently reducing the burden on the shoulders of family or government programs.
- The benefit of decades of premiums paid on a policy to be realised by an individual in need rather than forfeited to insurance companies.
As a signatory to the United Nations Principles of Responsible Investment (UNPRI), Laureola Advisors believes its life settlements fund can help vulnerable retirees.
ESG is more than a governance issue and environmental stewardship, it can also directly help people in need. An investment in life settlements can be an investment in the physical and financial wellbeing of senior citizens in the United States.
Nathan Wares
Managing Director
Australia & New Zealand
Laureola Advisors
nathan.wares@laureolaadvisors.com
Level 1, 60 Martin Place
Sydney NSW 2000
+61 419 542 646
John Swallow
Director
Laureola Advisors
john.swallow@laureolaadvisors.com
UK