This is an interesting article tucked away in today’s WSJ (click on the link below). The team that helped establish AIG as a leader in the life settlement marketplace, has formed its own new company – “’There is a void in the market that we are looking to fill as institutional investors look for returns that aren’t volatile or closely linked to traditional markets….’Currently, investors are unsure of how to invest or who to trust.’”
What is so interesting to me is how much the life insurance industry has actually learned from life settlement promoters (bad and/or even fraudulent practices aside). For example, I’ve written many times that high net worth clients are purchasing life insurance for pretty compelling internal rates of return (IRRs) on death benefit at life expectancy. Additionally, as mentioned in the article, the returns can be guaranteed at any given age, are predictable, and non-correlated to the stock market. Worth pondering…if life insurance death benefit can be considered a valuable investment by outside investors, might it not also be a valuable investment for clients? I’m dealing with sophisticated clients everyday who are considering the purchase of life insurance because they want it, not because they need it.
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Albert E. Gibbons
AEG Financial Services