First coined by Michael Abraham, the term Traded Life Policy, or TLP, known in the US as life settlements, is a life insurance policy sold at a discount by a policyholder in order to unlock the benefits in their lifetime. It’s this discount that provides the investor with a return – the new owner receives the full benefits of the policy on the death of the original policyholder. One of the chief attractions of TLPs is that they provide a guaranteed payout, as policies are not linked to any form of investment performance.
TLPs offer the life insured living with long-term illnesses much-needed liquidity by making them lump-sum payments. For policyholders, it means greater quality of life: for investors, it’s a way to invest in a previously inaccessible asset class.
Leading Market researchers Conning Research & Consulting Inc, predict that the Life Settlement market will experience considerable growth over the next few years. After analyzing the market Conning estimates that US life settlements in 2008 represented approximately $12 billion in face value. Over the ten year period from 2009 through 2017, Conning estimates the average annual amount of life settlements will be $21 billion.
Conning also estimates for the same time period that the average US Gross Market Potential (where the insured is impaired by only a single health criterion), will range between $105 billion and $209 billion in face value, or an average Gross Market Potential face value of $177 billion.