Life Insurance Investing Ramps Up

Chidem Kurdas

The life settlement market shows evidence of rising again, putting an end to exaggerated rumors of its demise. One sign of resurgence: new funds launched to invest in life insurance policies. Like one from Rochdale, a long-time high-net-worth investment adviser and manager of hedge and mutual funds.

Rochdale, founded by Carl Acebes and managed by him and Garrett D’Alessandro, sees low volatility and low correlation with the stock market as the advantages of life settlement investments.  They plan to perform due diligence on each policy and generally invest in policies issued by US insurers where the policyholders are over 65 years of age.

Careful analysis is essential for successful investing in life insurance. According to a news report, the Securities and Exchange Commission is investigating the way a Texas company estimated the life expectancies of insured individuals—the key factor for life settlement investor returns.

Investing in life insurance has long been subject to legal challenges. In a recent case publicized by the Wall Street Journal, Arthur Kramer, a wealthy lawyer in New York, had taken out $56 million in life insurance and immediately sold the policies to investors. His family contested the legality of the transaction after he passed away and demanded the insurance money.

A WSJ article referred to “the legal wreckage from a now-collapsed boom in the market for life-insurance policies purchased by investors.”

But then the New York Court of Appeals ruled in favor of the investors, affirming that it is legal to take out an insurance policy with the intent of selling it to strangers—-as the late Mr. Kramer, a top lawyer, no doubt  knew. This decision will likely influence other life settlement cases.

That reduces the legal risk but even so this is not a market for the casual investor. The Rochdale fund is for big investors only.

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