Washington, D.C. (PRWEB) November 2, 2009
Peter Mazonas, Life Settlement Economic (LSF) CEO testified right now before the SEC Life Settlement Process Force in help of the use of accounting requirements to enforce consistency in the valuation of securitized pools of life settlements. As investment banks ramp up their efforts to generate new investment opportunities, the SEC Life Settlement Job Force is studying how this can be done in approaches that safeguard investors in this emerging market. Hoping to avoid the catastrophic events brought about by misvalued mortgage pools, the SEC heard from an business leader who described new strategies of person life settlement evaluation.

A life settlement is the sale of a life insurance coverage policy to a third party. The new owner continues to pay the premiums and receives the face value of the policy at maturity. The original policy owner gets out from beneath the burden of paying premiums and receives a lump sum money payment. An increasing number of states have adopted or rewritten life settlement legislation in light of the demand for such transactions.

Now, as investment banks are looking to generate securitized pools of these assets, the want for even greater transparency becomes crucial. Whether or not in an person policy or pool of policies, the crucial variable in pricing requires the estimation of the life expectancy of the insured. The shorter the life expectancy (LE), the fewer years of premiums needed to keep the policy in force. The longer the LE, the more years that premiums will have to be paid out ahead of collecting the death benefit. This is the key determinate in pricing a life settlement policy.

FASB auditing standards demand that there be two techniques to evaluate or value the policy pool. Considering that the only true variable is the LE, this would suggest the need for two techniques of predicting life expectancy. The at the moment accessible method is primarily based on underwriter’s review of the medical records of the insured. The nationally recognized underwriters all use the exact same medical records but apply their own interpretation of the information inside. Despite the fact that this approach has been the basis for LE prediction, it consists of some inherent errors that can result in considerable mispricing.

For the SEC to apply the needed two methods of evaluation, Mazonas suggested the need to have for yet another predictive tool, “A distinctly distinct methodology exists which is based on existing health and accurately predicts the decline of overall health at the individual level.” Based on eighteen years of data from the National Extended Term Care Survey, award-winning actuary Eric Stallard, research professor at a significant analysis university, has designed a model that utilizes more, and much more relevant, information than is identified in a medical records only LE estimate. This peer reviewed and published model is primarily based on more than 317,000 person years of data.

The mortality model has since been independently implemented in the Longevity Expense Calculator (LCC), owned by Life Settlement Monetary, and a working Internet-primarily based model is available at https://www.lifesettlementfinancial.com. The LCC takes into account functional and cognitive impairments as properly as variety of motion and behavioral changes of the insureds. Well being care workers in senior residences and hospitals have long witnessed that these impairments are a higher predictor of mortality than healthcare circumstances. LSF has produced this available in a laptop model based on 76 questions about the insured that contain medical circumstances.

Mazonas applauded the SEC’s desire to get it proper at the beginning as this new wave of securitizations takes shape. “It would look a shame to squander this chance, especially offered the problems concerning other types of securitizations that we have all witnessed during the current previous. “

Life Settlement Economic, LLC was founded in 2006 and is positioned in Northern California. Its management believes that life settlements are a customer advantage as properly as a public policy enhancement. Providing seniors who personal life insurance the possibility of locating cash that they did not recognize that they had must be encouraged in this economy. As seniors struggle to keep away from relying on state and federal Medicaid help, they must be rewarded for remaining solvent and a life settlement can go a long way toward allowing this to take place.

For more data about life settlements and LSF go to http://www.lifesettlementfinancial.com or contact 888 321-5970.

Media Get in touch with: Dr. Bob Rosenberg, 415 526-5973

# # #