Amrita: Life Settlements Continue Slide

By Staff Writer

April 06, 2010 at 08:00 PM

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The Amrita Life Settlement Index fell about 29% in March from its February level, to 325 points from 455, showing a continued slide in demand for insurance policies on the secondary market.

The 130-point drop was a result of increasingly conservative buying activities and sentiments from life settlement providers, according to Amrita Financial Inc., Oceanside, Calif., which developed the index.

Bearish market factors were behind the decline, says Amrita, a Web-based settlement service. Specifically:

–The number of insurance policies received by life settlement providers for purchase consideration rose in March.

–The number of policies for which life settlement providers chose to tender offers decreased.

This growing imbalance of supply and demand is an example of the persistent illiquidity in the current life settlement marketplace, the company says.

The expected internal rate of return sought by institutional buyers is reflected in their purchase offers. As the targeted IRRs and returns on investment go up, the life settlement purchase prices go down. For the first time since the Amrita began its index, the expected IRRs are trending upward.

This increased purchasing power by buyers suggests a decline in competition for policy acquisition and looser demand in general for life settlements, Amrita says. Life settlement provider buying requirements remain conservative but are unchanged across all survey respondents.

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