The European Life Settlement Association has backed the FSA after it warned life settlements present significant risks to unsophisticated retail investors.
Earlier this week, the FSA warned the products are high risk, toxic products and said it aimed to ban TLPIs from being marketed to retail investors.
TLPIs are known as ‘death bonds’ because investors are putting their money into a pooled investment or fund which invests in US life insurance policies. Investors are essentially betting on when a particular set of US citizens will die and if these people live longer than expected then the investment may not function as expected.
Life settlement policies were the underlying investment behind Keydata’s Lifemark products. The collapse of Keydata triggered an industry interim levy of £326m, with advisers paying £93m and fund managers paying £233m.
ELSA deputy chair Michael Fugler says: “I strongly agree with the FSA that historically many product structures sold to retail unsophisticated investors have been complex and opaque and a number of the past products were toxic and should have required a significantly heightened degree of warning and clarity before investment considerations were made.
“But one must remember that in the early stages of this industry there were few laws or regulations which tended to initially attract some unscrupulous people, so, unfortunately the life settlement industry like other industries before it, got off to a difficult start.”
“Maybe there are or will be structures and sponsors who can develop product in the future worthy of consideration, let’s keep an open mind and have a healthy dialogue.”