Elsa sets out a code of practice for life settlement business

The trade body for the traded life settlement market, the European Life Settlements Association, has issued a code of practice for its members designed to increase protection for investors.

Elsa says: “Members must either comply with the code or face suspension and ultimately expulsion from the association.”

In February, FSA head of investment policy Peter Smith said he had “significant concerns” about levels of transparency in the industry in a speech at the Elsa trade mission in London.

The industry sector offers products investing in US traded life settlements, known by some as “death bonds”, which are life policies that are sold on the open market.

Keydata sold traded life-based bonds as low-risk investments for several years and collapsed last year, throwing 85,000 investors’ savings into chaos.

Elsa chairman Patrick McAdams says: “As is often the case with new asset classes, teething problems, some of them serious, have occurred within life settlements. Sadly the better known of these problems have wrought painful damage on both investors’ pockets and the reputation of the asset class. They have, however, also taught us some important lessons.”

SL Investment Management chief executive Jeremy Brettell says: “SL welcomes the new Elsa code. We will now see a level playing field where investors are armed with the right framework to pick the best managers.”