Insights into the Life Settlement Industry: A Look at Trends and Opinions within the Secondary Market for Life Insurance Policies
Growing Trend: Life Settlements as a Stable Fixed Income Option
The life settlement industry is experiencing significant growth, driven by increasing demand from institutional investors seeking non-correlated fixed income investments during economic uncertainty and market volatility. This trend is supported by the European Life Settlement Association (ELSA) and is detailed in the Life Settlement Insights report, a compendium of articles examining the life settlement market.
Deals in the life settlement industry are conducted over the counter between investment managers and life settlement brokers. The U.S., being the primary location for the life settlement industry, is expected to see continued growth as the U.S. population increases and correspondingly more life settlement policies become available.
Institutional Demand Driving Growth
Large alternative asset managers such as Apollo and Blackstone have entered the life settlement market, citing its stable, actuarially driven returns and "non-cyclical" characteristics that hedge against equity market risk and rising interest rate volatility. The life settlements market is expected to reach over $45 billion in life insurance face value annually by 2027, up from $22 billion in 2020.
Stable, Non-Correlated Returns
Life settlements are noted for their low correlation with traditional asset classes, making them an attractive fixed income alternative for investors seeking to diversify portfolios exposed to market and interest rate volatility. This stability increases their appeal as a fixed income–like investment, particularly when traditional bond yields are affected by fluctuating interest rates and economic growth concerns.
Benefits to Policyholders
As investor competition grows, policyholders—especially seniors over 65 with universal or whole life insurance—may see higher offers, with buyers paying four to eight times the surrender value of policies. This trend offers a valuable financial exit, particularly when market volatility, inflation, and healthcare costs strain retirement finances.
Industry Growth Amid Economic Complexity
Despite pressures from higher interest rates, rising corporate insolvencies, and a volatile commercial real estate market impacting life insurance companies' investment portfolios, the U.S. life and annuity sector experienced income growth in 2025. However, increased expenses and capital losses pressured profits, indicating a complex environment for insurers.
Historical and Academic Validation
Studies affirm that life settlements frequently deliver significantly higher returns to policy owners compared to surrendering policies. For example, a 2013 study found life settlements returned about four times policy surrender values. The sector's growth aligns with academic findings highlighting substantial volumes of senior-owned life insurance potentially accessible for settlements.
In summary, the life settlement industry is growing as a niche fixed income alternative favored during uncertain economic growth phases. The combination of rising institutional demand, compelling risk-return profiles, and benefits to policyholders amid inflation and market volatility positions life settlements as an increasingly important asset class within the broader fixed income and alternative investment space.
The Life Settlement Insights report provides a comprehensive overview of the life settlement market, detailing the pros and cons of allocating to these strategies, and the outlook for future growth. Fixed income investors, facing challenges due to low real yields and potential inflationary pressures leading to rising interest rates, may find life settlements an attractive alternative.
[1] Source: Life Settlement Insights report, 2021 [2] Source: S&P Global Market Intelligence, 2021 [3] Source: InvestmentNews, 2021 [4] Source: The Conversation, 2019 [5] Source: Journal of Financial Planning, 2013
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