Phoenix Life Insurance Company is planning to formally open its own life settlement business in the next 2-3 weeks, said a Phoenix executive who spoke during the Society of Actuaries' Investment Symposium here.
The new business will be called Phoenix Life Solutions and will be offered through a group of 4 brokerage general agencies with which Phoenix is in final negotiations, said Christopher Macklem, second vice president and actuary with Phoenix, Hartford, Conn. The BGA agreements are expected to be in place in the next few weeks, he said.
Currently, the new subsidiary has not settled any policies, Macklem said, adding that when it does start operations, it will begin working with "very large face amount policies."
The new unit will settle both Phoenix policies as well as contracts from other insurers, Macklem said.
An initial announcement was made by The Phoenix Companies, parent of the new subsidiary, in September 2007.
Macklem described parameters that are going to be put in place to make sure transactions are legitimate. Among the guidelines contemplated are: elevated market conduct efforts and refusal to purchase 'wet paper' life insurance contracts, pricing that will be very transparent, and documentation of compensation.
The maximum commission that will be paid on a contract is 20% of the value created in the settlement of the policy which, on average, is about half of what the industry has charged, he said. The provider fee will be 5% of the value created, also half of what the industry currently offers, he added.
Both regulators and rating agencies have been told about Phoenix's plans and the reaction is positive, he continued.
Phoenix looked into the possibility of a joint venture with a life expectancy provider that is a medical underwriting company, a life settlement distributor, investment banks and investors, and decided it had the capability to build its own business, he said.
Building its own subsidiary will allow Phoenix to leverage its name, he said, noting that Phoenix policy holders are high net worth clients with an average face amount of $2 million, a demographic that makes it a fit for the life settlement business.
Macklem said that as the securitization market grows, he believes Phoenix will be able to provide guarantees to make life settlement securitizations more palatable to the rating agencies.
The details of the new life settlement unit prompted a number of questions from attendees at the session, "Darling or Deadly? Life Settlements and the Secondary Insurance Market."
