MARCH 2009 | AGENT'S SALES JOURNAL22
� Changes in business circumstances,
eliminating the need for a key-person
policy or buy-sell agreement coverage
� Poor business conditions disrupt
cashflow
5. Tax considerations
� Legislative changes have reduced ex-
posure to estate taxes
Great expectations
As is the case with any transaction,
the expectations and assumptions of
the client should be carefully managed
throughout the entire process. This
is especially important today, given
the realities of the current settlement
market. Barely noticeable to many, with
attention focused on troubled equity,
bond, and mortgage portfolios, the life
settlement market struggled in 2008.
The credit markets, which started to
tighten up in the fall of 2007, have
had a profound, game-changing im-
pact on the settlement industry and
its processes.
Asaresult,andnearlywithoutwarning,
advisorswatchedrelativesettlementoffers
for clients' policies plummet, assuming
they could secure any offer at all. In other
instances, offers were pulled before they
could even be presented to the policy
owner, or strict take-it-or-leave-it offers
were extended with very short deadlines
for acceptance. Not surprisingly, deal flow
receded, while confusion and indecision
replaced the rampant confidence so ap-
parent in the market just a year earlier.
All this would have made settlements
difficult enough, but industry participants
are also contending with a dramatic "rule
change" that is more directly impacting
the process. In late 2008, dominant life
expectancy report providers adjusted
their projections upward, meaning that if
insured parties would live longer, policy
buyers would have to wait longer to col-
lect, and, in reaction, offers for policies
would be forced down.
So the sorting out continues. The pres-
sures of the financial markets will likely
continue to be evident in buyer behavior,
manifested by marginally higher discount
rates utilized for pricing and continued
policy and insured selectivity. Bottom
line: With the tables turned, and more
policies available than funds, the buyer's
market remains.
But looking forward, there are reasons
for optimism. The current credit market
issues and related problems do not de-
tract from the intrinsic appeal of the life
settlement transaction. The settlement
often remains a very good alternative
to the cash surrender of a policy. Still,
it goes without saying that we urge our
partner agents to do whatever is in the
client's best interest, including when it
means keeping the policy in-force for
the near-term.
In addition, new potential funders are
showing genuine interest. Buyers from
Europe and South America have been
particularly vocal. This will eventually
put upward pressure on policy prices.
All that said, sellers of policies may
continue to contend with uncomfort-
ably short decision-making timeframes
when considering offers.
In this environment, it is crucial to
inform clients as to the marketability
and potential value of a policy. Case
documentation must be gathered prior
to preliminary marketing in order to
present potential buyers with a thorough
understanding of a policy's value, prod-
uct features, and ownership structure.
A carefully prepared case can help to
ensure an uneventful, timely close.
Scott DiMuzio is national sales manager at Life
Settlement Insights LLC, a national life settle-
ment brokerage firm based in Cleveland. He can
be reached at 800-574-4321 or scott.dimuzio@
lsinsights.com.
DiMuzio, from page 20
" Bottom line: With the tables turned, and more policies
available than funds, the buyer's market remains.
"
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2009 GUIDE TO
LIFE SETTLEMENTS

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