Shapo Says Life Settlement Market Needs Better Rules

"Part of the natural growth of the secondary market will involve the recognition that life settlements are basic financial planning tools separate and distinct from viatical settlements, which have a very unique and very narrow reach," Shapo says.

Viaticals involve "desperate end-of-life decisions under great financial and time pressure," he adds.

Coventry's typical customer, on the other hand, has a life expectancy of 10 years "and the seller is a sophisticated policy owner who, with the benefit of professional counseling and financial planning, has decided that the policy's market value outweighs the benefit of keeping it in force," Shapo says.

Some observers see the life settlement business as a threat to the life insurance industry, because carriers count on a certain number of policies lapsing every year. But not Shapo.

"I consider identifying and seeking common ground with carriers a top priority," he says. "Responsible actors on both sides ultimately have substantial shared interests. In fact, a well-functioning secondary market should benefit carriers by creating demand in the primary market as consumers see the full value of purchasing a policy."