The European Life Settlement Association (ELSA) has launched a retail market consultation into the practices and issues surrounding life settlements.
The body is in the process of developing a code of practice for sellers of traded life policy investments and has decided to engage specifically with the IFA community because of questions already raised by the Financial Services Authority (FSA) about the asset class.
Earlier this year, the American Council of Life Insurers called on regulators to ban the securitisation of life settlements and the FSA raised concerns over the quality of marketing materials relating to traded life policy investments, suggesting that much more detailed and prominent risk warnings should be included in the literature.
ELSA chairman and investment director at SL Investment Management, Patrick McAdams, comments: “Our aim in taking a principles-based approach is to encourage greater standards and more disclosure across the industry, and move beyond a simple box-ticking exercise to be compliant.”
He adds: “Only by creating this level of confidence in the market, can we expect to see investors acknowledge the very real diversification benefits offered by life settlements, and the capacity of these investments to provide a return that, if held to maturity, is typically shielded from the booms and busts of the conventional investment cycle.”