Managing Partners Limited (MPL), the boutique fund manager, has welcomed new legislation in Washington State that requires life insurance companies to inform policyholders that they have the option of selling their life insurance policies rather than letting them lapse.

MPL anticipates that the legislation will be replicated across the US states and will provide a massive boost to the traded life policy (TLP) market.

The new legislation will help boost the supply of life policies, offering more choice and reducing cost to investors. Currently 85% of insurance policies lapse without payout, with a mere 3% surrendered for cash value. Shockingly only 12% of all life insurance policies taken out will have a payout on death.
 
This new measure was introduced to protect policy holders, giving them the option of cashing in their policies and legally obliging insurance companies to disclose this option to them. $23 trillion of death benefit existed in the US in 2006, making it the largest life insurance market in the world.

Jeremy Leach, Managing Director, MPL said: “We are delighted that the need for change has been recognised. Appetite for TLP funds has risen exponentially over the last year, as a result of the difficult market conditions forcing investors to turn to the steady, uncorrelated returns that TLP funds offer. Our Traded Policies Fund’s GBP Growth share class, which is available to retail investors, returned 10.47% net of all charges in the 12 months to 1 January 2009. The GBP Institutional share class delivered 10.56% net of all charges over the same period.”

TLP’s are US-issued whole-of-life policies sold before their maturity date, allowing the original owners to enjoy some of the benefits during their own lifetimes. TLPs can be used to deliver steady, incremental returns that are uncorrelated to other financial asset classes.

Jeremy Leach, concludes “Holders of life policies might wish to sell before maturity for a number of reasons. They might no longer wish to pay the premiums, or they might need the cash for purposes such as paying for care. Selling policies on the open market means policyholders can reap the benefits from policies they have paid for. We fully support all laws and regulations that seek to license providers and brokers and to provide full and fair disclosure to the consumer.”

This entry was posted on Monday, May 18th, 2009 at 5:53 am and is filed under Managing Partners News. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.