Why Economic Uncertainty Has Institutional Investors Eyeing Life Settlements
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- Author: Windsor Life Settlements
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When Markets Shake, Smart Money Looks for Shelter
Advantage policyholder. In times of market volatility, non-correlated assets like life settlements are gaining traction as a haven for stable returns.
Global markets have been anything but stable in 2025. With the U.S. imposing sweeping new tariffs on Chinese technology, European industrial goods, and Latin American agricultural imports, ripple effects have slammed the S&P 500 and stirred fears of a prolonged trade war. The index fell 7.2% in March alone, and volatility metrics like the VIX have reached their highest levels since mid-2022 .
In this kind of environment, institutional investors—pension funds, family offices, hedge funds—start searching for what all investors crave in a downturn: stability, yield, and low correlation to market swings.
Enter: life settlements.
What Are Life Settlements, and Why Now?
A life settlement is the sale of a life insurance policy from an individual (usually over age 65) to an institutional buyer. The buyer becomes the beneficiary, takes over premium payments, and eventually collects the death benefit.
These investments have long been under the radar, but that’s changing—and quickly. What makes them so attractive in a volatile economy?
- Returns aren’t tied to stock or real estate markets
- Cash flows are uncorrelated with interest rate swings
- Performance is driven by actuarial science, not market sentiment
Equities and Real Estate Are Losing Their Shine
Traditionally, institutional portfolios have leaned heavily on equities and real estate. But both are vulnerable during economic slowdowns, especially those caused by geopolitical shocks like tariffs and trade disputes.
▸ Stocks:
The correlation between equity markets and global policy risk is well-documented. During the 2018–2019 U.S.-China tariff standoff, the S&P 500 saw five separate drops of more than 5% in less than a year .
▸ Real Estate:
High interest rates and inflationary fears have already cooled property values. In Q4 2024, commercial real estate investment volumes fell 32% year-over-year across North America . With borrowing costs up and office vacancies surging, yield compression is hitting institutional real estate portfolios hard.
Life Settlements: The Alternative Asset with Built-in Stability
In contrast, life settlements remain insulated from most macroeconomic shocks. They don’t rely on consumer spending, GDP growth, or monetary policy. Instead, their performance is driven by the life expectancy of insured individuals and the contractual guarantees of life insurance carriers.
➤ Performance Metrics:
8%–12% target IRR: According to a Conning & Co. report, life settlement funds historically target internal rates of return between 8% and 12% annually .
Near-zero correlation to traditional markets: A 2022 study from the Society of Actuaries noted a “statistically insignificant correlation” between life settlement fund performance and the S&P 500, U.S. Treasury yields, and commercial real estate indices .
➤ Liquidity Trade-Off, Yield Payoff:
While life settlements are illiquid—typically 6–10 years in duration—they offer yield in exchange for patience. For institutions with long-term horizons, such as pension funds and endowments, that’s a favorable trade.
Institutional Demand Is Surging
Investors are taking note.
$45 billion+ of life insurance face value is expected to be sold annually by 2027, up from $22 billion in 2020, according to market research from ISC Services .
Major alternative asset managers, including Apollo and Blackstone, have made high-profile investments in the life settlement space, citing the asset’s “non-cyclical” appeal.
A report from PwC’s Alternative Investment Center called life settlements “a compelling hedge against both equity market risk and rising interest rate volatility,” especially in aging Western economies .
How This Affects Policyholders Looking to Sell
For policyholders—particularly seniors over age 65 with universal or whole life insurance—this increase in institutional demand is a potential financial opportunity.
1. Policies May Be More Valuable
When investor demand rises, competition to acquire quality policies increases. This can result in:
- Higher offers for eligible policies
- More aggressive bidding from providers and brokers
- Better terms for sellers, including upfront payments and assumption of future premiums
In economic uncertainty, institutions are willing to pay a premium for assets that offer stable, actuarially driven returns. A well-structured life policy becomes a highly attractive financial instrument.
2. Policyholders Have More Exit Options
Rather than lapsing a policy or surrendering it to the insurance carrier for a fraction of its value, sellers may receive four to eight times more through a life settlement, according to the Life Insurance Settlement Association (LISA).
This is especially important when:
- Market volatility reduces the value of retirement portfolios
- Inflation and tariffs increase the cost of living
- Seniors face rising healthcare or long-term care costs
3. Timing Matters
The current surge in demand may not last indefinitely. As more investors enter the market, underwriting standards may tighten, or returns may compress. Now may be an opportune time to evaluate selling, especially for policies with strong death benefit-to-premium ratios and favorable health profiles.
Bottom Line: Life Settlements Are the “Alternative” for the Age of Uncertainty
Today’s economic climate—marked by tariffs, inflation, interest rate unpredictability, and geopolitical tension—is pushing institutions to rethink traditional asset allocation models. And life settlements, once a niche play, are now commanding attention from some of the world’s most sophisticated capital allocators.
For investors, they offer diversification and stability.
For policyholders, they offer liquidity and financial relief.
That combination makes life settlements one of the few asset classes where market volatility creates a win-win scenario.
Sources:
Bloomberg Markets, “Tariffs Slam Equities in March Selloff,” April 2025
Goldman Sachs, “U.S.-China Trade Risk and Market Volatility,” Analyst Report, 2020
CBRE Research, “Q4 2024 U.S. Capital Markets Report,” February 2025
Conning & Co., “Life Settlements: Continued Growth and Maturity,” 2023
Society of Actuaries, “Correlation of Alternative Assets with Traditional Markets,” 2022
ISC Services Market Forecast, “Secondary Life Insurance Market Outlook 2024–2028”
PwC Alternative Investment Center, “Alternative Investment Outlook 2025,” January 2025
Life Insurance Settlement Association (LISA), Industry Data Summary, 2024
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- Author: Windsor Life Settlements
- Published Date:
