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Daily Insurance Industry News
Tuesday 21st of November 2017
February 26, 2010

ELSA promises Code of Practice for life policy securitisation

by Gill Montia

Story link: ELSA promises Code of Practice for life policy securitisation

The European Life Settlement Association (ELSA) has announced that it is developing a Code of Practice for sellers of traded life policy investments.

The body has also welcomed an address given by the Financial Services Authority (FSA) earlier this week at the ELSA/LISA European Life Settlement Trade Mission in London.

The regulator raised concerns over the quality of marketing materials relating to traded life policy investments and suggested that much more detailed and prominent risk warnings should be included in the literature.

However, the FSA also made clear that it did not inherently oppose the use of life settlements by sophisticated retail investors.

ELSA chairman, Patrick McAdams, comments: “We welcome both the dialogue and the commitment from the FSA, in particular its assertion that it is intervening earlier by shifting its focus upstream for all complex products, including those backed by life settlements.”

He adds: “Ever since its formation last year, ELSA has been championing greater regulatory consideration of this sort, which would force much more detailed consideration and disclosure of asset risks and how these are managed.”

Life settlement backed investments (which turn life insurance policies into tradable assets) are an asset class that has expanded rapidly as a result of the financial crisis.

Earlier this month ELSA opposed calls from the American Council of Life Insurers for a ban on this form of securitisation on the grounds that it could increases the risk of fraudulent policy applications.

According to ELSA, a growing understanding of the asset class is being exhibited by financial intermediaries, institutions, discretionary wealth managers, and high net worth investors.

 

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