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Moral issues cloud life settlement sales

Moral issues present a barrier to sales of life settlement funds despite record earnings in recent months.

Philip J Milton & Company managing director Philip Milton says his firm has not put clients into these funds due to the morality question of profiting from another person’s death.

He says: “It is a hard one to sell and if investors are getting a good return, does this mean the life insured is not? Sometimes, when things are a little bit too opaque, that is a good enough reason not to participate and you could possibly level that at the life settlement industry.”

A life settlement involves the sale of a life insurance policy by a policyowner for less than the face value of the policy to third-party investors.

The third-party investor will seek to gain upon the death of the insured.

Baronworth Investment Services director Colin Jackson says: “Life settlement funds are sometimes very hard to explain to a client, particularly if they are elderly. It is all about dying and sometimes clients do not want to hear about that. You have to rely on the actuarial valuation. There is really no other way of valuing them and that is a bit of a problem.”

EEA Fund Management says it re-underwrites every policy it bids for by using the services of two independent medical experts. The life expectancy of the policyholder is determined as the average of the two opinions.

Marketing director Peter Winders argues that the asset class is a socially responsible investment.

He says: “Because EEA purchases policies from individuals with impaired life expectancy, we would argue that this is highly moral as there is less speculation about the timing of the individual’s death.”

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