The Life Settlements Report - June 19, 2008

Faulty Life Expectancy Reports, Bankruptcies or Fraud to Blame

Purchasers of life settlements in the tertiary market say a growing number of distressed portfolios have come up for sale in recent months, including German funds that apparently relied on overly optimistic life expectancy reports.

Buyers are also seeing troubled U.S.-based funds resulting from bankruptcies or fraud.

The potential damage to the secondary market to be caused by strict, new life settlement laws may not be as severe or as broad as settlement industry advocates have said.

On May 10, Iowa became the fourth state whose governor signed legislation requiring a five-year waiting period before new policies can be sold. The law is aimed at curbing stranger-originated life insurance (STOLI). Nebraska, North Dakota, and West Virginia have passed laws that also included the five-year waiting period. The laws also placed restrictions on premium financing, which can sometimes serve to facilitate STOLI.

Decision on First Penn Expected in Fall

The insurance industry is awaiting the result of an appeal of a court ruling that found that an insurer couldn't rescind a policy that it failed to dispute during its contestability period, even though the insured committed fraud.

First Penn Life Insurance of Schaumburg, Ill., is appealing the decision of Judge Andre M. Davis of the U.S. District Court in Maryland. The case involved a policy First Penn sold to Arizona resident Stanley Moore. Moore failed to inform First Penn that he had purchased several other policies and falsified his medical records.

• Insurance Groups Claim STOLI Definition Being Weakened
• New York's Legislature Weighing New Bill to Regulate Market
• California Assembly Committee to Hear Settlements Legislation
• Ohio Governor Signs Hotly Contested Settlement Bill
• Connecticut Governor Signs NCOIL-Inspired Bill
• Terrell, Formerly of Bear Stearns, to Lead New Venture
• Life Partners Says It Expects to Report 32% Profit Growth
• Hawaii Governor Signs NCOIL-Based Life Settlements Legislation
• MaxLife Fund Plans First Quarterly Dividend
• Peachtree Hires Vice President of Capital Markets
• Habersham Funding Hires Training and Development Director