The life settlement industry, still reeling from its loss of funding sources in 2008 that caused a 4% decline in transactions, may be poised for a strong return, an industry analyst predicts.

Stephan Christiansen

“The buyers’ market of late 2008 and 2009 should help buyers re-establish profitability in their portfolios,” said Stephan Christiansen, director of research at Conning Research & Consulting, in a statement. “More policyholders want to sell, and more agents now understand life settlements — the near term challenge is all about buyers’ and investors’ capacity.”

He added that the life settlement market “must shake off profitability concerns and general market concerns about life insurer solvency before it will return to growth.”

The volume of transactions in the life settlement market declined by about 4% in 2008. Transactions fell to an estimated $11.7 billion in face value, a reduction from the $12.2 billion the year before, a Conning Research and Consulting study reported.

Without sources for funding available in a good economy two and three years ago, many life settlement companies were unable to purchase life insurance policies over the last year. Further eroding the market as the decision of several major life expectancy underwriters to revise their methodologies, raising life expectances, which in turn called into question the accuracy and valuation of existing life settlement portfolios, said Scott Hawkins, analyst for Conning.

The lack of funding sources came just when the economy led people seeking quick cash to recoup from stock market losses to consider life settlements, according to other industry experts.

“The economic crisis was the major impediment to growth in the United States life settlements market in 2008, as the credit markets froze in the second half and life settlements buyers had difficulty financing new premiums,” Hawkins said.