Competitiveness Analysis of Life Settlement Security under Financial Crisis

• Main Authors: Po-Shun Wang, 王柏舜
• Other Authors: 呂育道
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/14336077818312488960

碩士 === 國立臺灣大學 === 資訊工程學研究所 === 97 === The emergence of life settlement has broken the long-existed monopoly status of life insurance companies in the secondary market for life insurance policies. Through a life settlement transaction, the insured could sell his policy for an amount greater than the surrender value of the policy and then use the money to satisfy the liquidity needs or to fund new financial plans In such transactions, the settlement provider could charge a commission on the deal, and the investor could get the difference between the face amount of the policy and settlement amount. All participants will benefit from the deal. However,investors may be unfamiliar with this kind of product. They do not know the product structure and where the return and risks come from. This thesis begins by introducing the background of the product and the product structure. Next, the thesis investigates how the various factors impact settlement prices. The result shows that life expectancy plays a critical role on the valuation of life settlements. Policy premium and discount rate can also influence the price. On the other hand, age of the insured has nearly no effects on the price. This thesis also compares life settlements with some other investments for understanding the competitiveness of life settlement. The result shows that life settlement indeed is competitive because its return is not affected by business cycles. Finally, this thesis analyzes how life expectancy affects the returns of life settlements.