Health & Life Insurance Actuaries | Lewis & Ellis Inc.

LE*SETTLEWARE™ Life Settlement Pricing Tool

LE*SETTLEWARE™ allows a provider to competitively and successfully acquire life settlement contracts, while gaining a better understanding of how the cash flows will emerge and why.

Life settlement pricing

LE*SETTLEWARE™ calculates all three industry recognized life settlement pricing methodologies (Deterministic, Probabilistic, and Stochastic). This serves as a valuable resource when bidding on the acquisition of a life settlement contract. In the beginning, most providers used the Deterministic approach, which consistently yields inefficient lower purchase prices. LE*SETTLEWARE™ provides a life settlement acquirer a distinct competitive advantage by allowing for a much purer mathematical approach to pricing.

Life expectancy calculation

In the world of life settlements, the life expectancy (LE) calculation forms the initial and most important input item in contract pricing. There are three industry recognized LE methods. The Lloyd's Method determines the LE in months, whereby 85% of the specifically rated class would be deceased by. The 50% Method, which is the same as the Lloyd's with the 85% replaced with 50%, measures the median life expectancy. The Actuarial Method, which is now the most prevalent method used in the industry today, measures the mean life expectancy. LE*SETTLEWARE™ allows you to choose any of the recognized methods.

Minimum premium calculation

LE*SETTLEWARE™ actuarially calculates the minimum premiums required to keep an acquired life settlement contract in force. This minimizes early premium outlays, thereby either greatly increasing the internal rate of return (IRR) for a given purchase price or significantly increasing the purchase price needed to achieve a desired IRR. Either way, this creates a competitive advantage since many providers still base their pricing on planned projected premiums.

Financial projecting and planning

LE*SETTLEWARE™ allows a provider to competitively and successfully acquire life settlement contracts, while gaining a better understanding of how the cash flows emerge. Financial projecting and planning becomes more of a science and less guesswork. The basic principles behind LE*SETTLEWARE™ are the same that actuaries have been using for years in pricing life insurance and annuities.

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Testimonials

“Solid documentation and communication of product updates and changes were key to timely and accurate system revisions.”

-- Tom Donaldson, Individual Product, Compliance and Illustration, Software DevelopmentManager Canada Life