By Larry Simon, Founder and CEO, Life Settlement Solutions, Inc.

In this issue of Life Settlements MarketWatch, we are celebrating a special milestone – the fifth anniversary of Life Settlement Awareness Month (LSAM)®. It is fascinating to look back on the changes our industry has seen since we began the month-long educational event five years back.

The first quarter of 2010 has been an active one for our company. In February, we hosted the second annual Insurance-Linked Investments Awareness Month (ILIAM)®, which garnered attendance from hundreds of investment professionals. The series of free, educational events covered portfolio transactions, distressed asset opportunities, purchasing strategies for private equity, hedge funds and pension plans, taxation, regulation and more.

Portfolio activity continued at a robust pace during the first quarter, however, the vetting, prospecting, capital raising and due diligence activities greatly exceeded the transaction closings throughout the industry. Portfolio transactions require an enormous amount of expertise, due diligence and patience. Nevertheless, the opportunities available in the tertiary market, particularly with distressed assets, can be worth the effort. Our experience in the industry in individual cases and portfolios has positioned us as a provider of choice with many institutions on both the buy side and the sell side.

Life Settlement Solutions, Inc. (“LSS”) continues to strengthen and broaden its life settlement portfolio servicing platform based on the demand for these services to be handled by experienced, capable and licensed providers. There are many new players in this arena; however, institutions have begun to realize the importance of having servicing performed by a firm that is able to conduct all activities related to servicing. LSS offers a full suite of functions for virtually the same cost as the newer players; however, our services come with the expertise gained from pricing, transacting and servicing billions of dollars of assets. This experience is critical to institutions being able to minimize costs, maintain policy assets and efficiently acquire benefits to achieve target IRR’s.

In March, we also attended the Life Settlements Trade Mission hosted by the Life Insurance Settlement Association (LISA) and the European Life Settlement Association (ELSA). This mission brought together several dozen investors with members of the life settlement industry at events held in London, Luxembourg, and Zurich. We commend the leaders of each organization and their respective staffs for bringing together such a dynamic group of life settlement industry and investment professionals. It is clear from the meetings that despite the prolonged effects of the financial crisis, life settlements continue to be an asset class of interest to various institutions worldwide because of their potential as an alternative asset class offering potentially attractive returns from highly rated issuers that are not directly correlated with major markets.

While capital supply and liquidity continue to restrict the market, we are noticing a highly diverse group of buyers taking interest in the life settlement asset class, including private equity, hedge funds, family offices and pension plans. While there have been some high profile firms exiting the industry, they are being replaced by a multiple of quality firms taking advantage of the buying opportunities in the market. These institutions are placing a heavier emphasis on risk management in the wake of the financial crisis and investor fraud incidents during the past few years. As a result, risk mitigation techniques have moved to the forefront of the evaluation process, especially those that address investor protection, the proper structure of investment vehicles, the use of securities intermediaries and poor historical performance.

Life expectancy evaluations have shifted towards conservatism, which has increased demand for qualified asset supply for both the individual case and portfolio markets within the desired LE ranges. In addition, a lack of distressed investment opportunities in other asset classes has shifted attention to life settlements to potentially fill voids in targeted IRRs.

Regulators have also continued to enact and refine regulations in this market, paying particular attention to interference by insurance carriers to the life settlement transaction process requirements, including the furnishing of verifications of coverage (VOC).

While the recovery from the financial process remains slow, the capital migration back into settlements is still occurring.  We are very optimistic about the prospects the second half of 2010 will bring and expect improved liquidity, which should have a major impact in the life settlement market over the next 6-12 months. 

This month, Life Settlement Awareness Month (LSAM)® will cover all of these topics in greater details during our most diverse panel of events to date.  All events are hosted on the Web and are free to attend. Registration is now open for all LSAM® events at www.lifesettlementawarenessmonth.com.  For further detail on the LSAM 2010, read the Tips of the Trade section of this newsletter.

Please feel free to contact us with questions or for more information at info@lifefirms.com.