Transaction Process
A typical life settlement transaction starts with the seller contacting his
or her life insurance agent. That agent will contact one of more life settlement
brokers and submit the policy for consideration (providing a policy summary,
a recent illustration and recent medical records for each insured.
Each life settlement broker will forward this information on to one or more life
settlement providers. Each life settlement provider will review the case
and may then submit a bid price for the policy (either before or after consulting
with its investors).
An auction process results, through which the life settlement broker should be trying
to recognize the best available price for the seller.
Ultimately, the seller will sell the policy to a life settlement provider, which
will on-sell the policy to one of its investors.
The life settlement broker should act as a fiduciary agent for the seller
- the life settlement provider should act as a principal.
Note that the only party which is at risk as a result of this transaction is the
investor - all other parties collect a fee for their involvement, which is rarely
at risk in the event that the mortality performance of the policy differs from expectations.
For a diagram of the transaction process, please click
here