Life settlements in South Africa: an assessment of the potential for a strong market to develop
Date
2013-10-22
Authors
Switala, Ryan
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Abstract
Life settlement, a transaction whereby the policyholder of a life insurance policy sells the future
proceeds of the policy to a third party investor, has established itself as a legitimate alternative
asset class in the US over the last decade. This research uses the key supply and demand side
forces that fundamentally shaped and continue to underpin the US market, as a framework to
assess the possibility of a South African life settlement market developing. Insurance product
design, market intermediation, regulation, tax legislation, investment markets, investor rationale
and more are explored through in-depth interviews with a range of industry experts. Results
suggest that, in principle, there is no definitive reason why a South African life settlement market
cannot exist. Across some dimensions the South African primary market may be even more
conducive to life settlement transactions than the US. However, in aggregate, these are
overshadowed by other forces such as greater investment risk, subtle market nuances and
some market size inhibitors that combine to significantly dampen the overall likelihood of the
development of a strong market.
Description
MBA thesis
Keywords
Insurance, Life settlements - Insurance