Life Settlements & Longevity Fund

Life Settlements & Longevity Fund: Actuarial Returns Uncorrelated to Financial Markets

Life settlements are among the most genuinely uncorrelated investments available to institutional investors. The return on a portfolio of purchased life insurance policies depends entirely on when the insured policyholders die — a fact of biology and actuarial science that has no relationship whatsoever with equity market valuations, interest rate cycles, credit spreads, or macroeconomic conditions. A financial crisis does not accelerate or delay mortality. A policy that matures when global equities fall 40% still pays its full death benefit.

This fund acquires secondary-market US life insurance policies from policyholders who have decided to sell their policies for immediate cash rather than continue paying premiums or surrendering for the insurer's low cash value. The fund pays the ongoing premiums, waits for the insured to die, and collects the full death benefit from the insurance carrier. The return is the spread between the total cost (purchase price plus premiums paid) and the death benefit collected.

The Secondary Life Insurance Market

In the United States, life insurance policyholders have the legal right to sell their policies to third parties — a right established by the Supreme Court in 1911 (Grigsby v. Russell) and robustly codified in state insurance law. A policyholder who no longer needs a large life insurance policy — because their estate planning needs have changed, their beneficiaries predecease them, or they need funds for healthcare or retirement — can sell the policy to an investor through a licensed life settlement provider.

The secondary market in US life insurance policies has in recent years transacted in the region of $4–5 billion of face value annually (industry data recorded approximately $4.7 billion in 2024), while industry studies estimate the addressable market potential to be many times larger. Policies sold are predominantly large-face-value policies (death benefits of $1 million to $20 million) on insured aged 70 and above, where the policyholder's life expectancy is sufficiently short to make the secondary market transaction economically attractive for both buyer and seller.

The seller receives more than the cash surrender value the insurer would pay on a lapse — typically two to five times more. The buyer (in this case, the fund) acquires a claim on the death benefit that, based on actuarial analysis of the insured's life expectancy, represents a positive-expected-value investment.

The Investment Mechanics

The fund's return is mechanically simple:

1. The fund purchases a policy from a selling policyholder at a negotiated price (typically 10–35% of the face death benefit, depending on the insured's age, health, and remaining life expectancy)
2. The fund pays the ongoing annual premium to keep the policy in force (typically 1–5% of face value per year)
3. When the insured dies, the fund files a claim and receives the full face death benefit from the insurance carrier
4. The IRR is determined by the total invested cost and the timing of the death benefit

To illustrate (hypothetical): A 78-year-old insured has a $5 million life insurance policy with an annual premium of $120,000. The fund acquires the policy for $1.4 million. If the insured dies in year 4, the fund has invested $1.4 million + 4 × $120,000 = $1.88 million to receive $5 million — an IRR of approximately 26%. If the insured lives to year 8, the fund has invested $2.36 million to receive $5 million — an IRR of approximately 9.7%. The fund earns a positive return across a wide range of mortality outcomes; the risk is that insured individuals live substantially beyond their actuarial life expectancy.

Longevity Risk Management

The principal risk in life settlements is longevity risk — the risk that insured individuals live longer than actuarial expectations, increasing the amount of premiums paid and reducing the IRR. The fund manages this through:

Portfolio diversification: The fund targets a portfolio of 200 or more policies across multiple insurance carriers, insured ages, health profiles, and policy face values. Across a large diversified portfolio, individual longevity deviations average out and actuarial estimates become reliable.

Independent medical underwriting: Each policy acquired uses independent actuarial life expectancy assessments from two or more specialist medical underwriters who review the insured's medical records in detail. The fund's purchase price is calibrated to these independent assessments.

Policy sourcing discipline: The fund sources policies through regulated life settlement providers and brokers across multiple US states. Strict pricing discipline means the fund declines any policy that does not meet minimum return thresholds at conservative life expectancy assumptions.

Premium financing reserves: The fund maintains a dedicated premium payment reserve, sized to cover premiums across the entire portfolio for a period significantly exceeding average life expectancy projections. This reserve ensures the fund can continue paying premiums even if early portfolio cash flows are lower than projected.

Insurance Carrier Credit Risk

The death benefit payable to the fund is an obligation of the original life insurance company. The fund manages insurance carrier concentration by holding policies across at least 15 investment-grade rated US life insurance carriers, with no single carrier representing more than 15% of the portfolio face value. US state insurance guarantee funds provide additional protection, typically covering up to $300,000–$500,000 per policyholder per carrier in the event of insurer insolvency.

Regulatory and Ethical Framework

The US secondary life insurance market operates within a well-established regulatory framework. All life settlement transactions are documented, licensed, and comply with applicable state insurance laws. The fund works exclusively with state-licensed life settlement providers and brokers.

The ethical dimension of life settlements is often raised by investors. Policyholders selling their policies do so voluntarily, with legal counsel, in a regulated market, and receive fair market value for an asset they own. The sale allows them to unlock the value of a policy they would otherwise lapse (receiving zero) or surrender at a fraction of fair value. Investors are providing a socially useful liquidity function.

Risk Considerations

Longevity risk: The fundamental risk is that insured individuals live significantly longer than actuarial projections, requiring extended premium payments and reducing returns. Medical advances that extend life expectancy — particularly in the 70–85 age cohort — represent a structural risk to long-term returns across the asset class.

Actuarial model risk: Life expectancy estimates are based on historical mortality data and medical underwriting assessments. Unforeseen changes in mortality patterns — disease, medical breakthroughs, lifestyle changes — can cause actual portfolio mortality to deviate materially from projections.

Illiquidity: There is a limited secondary market for portfolio life insurance policies, particularly in adverse conditions. The fund is closed-end with a projected eight-to-twelve-year life. Investors should not invest capital they may need to access.

Regulatory risk: Changes to state insurance law, tax treatment of life settlements, or federal regulation of the secondary market could affect the fund's operations and returns.

Premium payment risk: If the fund's premium reserve is insufficient, policies may lapse — the fund would lose its total invested cost in those policies without receiving any death benefit.

Suitability

Life settlements suit sophisticated institutional and high-net-worth investors who specifically value genuine uncorrelated returns — where the return driver has no relationship to equity or fixed income markets. It is a complex, specialist asset class requiring deep actuarial expertise and is not appropriate for investors seeking liquidity or those unfamiliar with insurance-related investments. Minimum investment $500,000.

How to Invest

Contact our investment team to receive the fund's private placement memorandum, actuarial methodology documentation, sample policy analysis, and current portfolio statistics. Extensive suitability and qualification process required. Minimum investment $500,000.

Important: Capital is at risk. Past performance is not a guarantee of future returns. Life settlement returns are sensitive to actuarial assumptions which may prove incorrect. This is for information purposes only and does not constitute a personal recommendation. Seek independent financial and legal advice before investing. This fund illustrates the type of life settlement opportunity Global Investments advises on — it is not a live investment offer.