State Regs May Force Some Settlement Firms Out of Business

Also rising in importance for the industry as a whole is the tertiary market, where settlements are packaged into investments, Buerger says. He points to the commitment in October of $100 million by the Oregon Investment Council, overseer of the Oregon Public Employees Retirement Fund, of $100 million with Apollo Global Management L.L.C., New York, to participate in a package of life insurance policies Apollo had purchased from a Belgian bank. (The policies became available at what was considered bargain prices because the bank was eager to get out of the life settlement market, according to press reports at the time.)

As for Coventry, Buerger says it now underwrites about 60,000 lives. A growing part of its business is its SWAPP (Settlement With a Paid-Up Policy) program. With SWAPP, individuals can trade an existing life insurance policy for one with a smaller face value. The idea behind SWAPP is to let individuals keep their life insurance without having to pay premiums, he says.

SWAPP plans are now about 40% of Coventry's sales, up from about 7% three years ago, Buerger says.