PT  - JOURNAL ARTICLE
AU  - Nemo Perera
AU  - Brian Reeves
TI  - Risk Mitigation for Life Settlements
AID  - 10.3905/jsf.2006.644160
DP  - 2006 Jul 31
TA  - The Journal of Structured Finance
PG  - 55--60
VI  - 12
IP  - 2
4099  - https://pm-research.com/content/12/2/55.short
4100  - https://pm-research.com/content/12/2/55.full
AB  - Investors seeking new structures for acquiring policies in the life settlement market encounter several underlying risks unique to the asset class. Those risks, described in this article, include contestability risk, missing body risk, insurable interest risk, incorrect-purchase-price risk, life insurance company credit risk, cost-of-insurance risk, and longevity risk. Some risks can be easily mitigated, but others require more complicated risk transfer mechanisms that combine financial products with insurance products. These products range from contestability coverage to more sophisticated mortality risk transfer constructs that blend equity derivative products with property casualty insurance. As the life settlement market evolves, risk mitigation will play an increasing role in reducing volatility and enabling predictable returns to allow for more institutional capital participation. Knowledge about the risks and the available risk mitigation solutions becomes a must for prospective investors interested in entering into the life settlement market.TOPICS: Other real assets, exchanges/markets/clearinghouses, credit risk management