Glossary
What does it all mean?
As you might imagine, any industry with the potential and promise of life settlements is bound to "spin off" terms and jargon. While you may recognize some of the following terms from conventional insurance, many of them have become part of the still-growing "life settlement lexicon."
Agent
A life insurance agent is an individual who has direct client relationships and originates life insurance transactions for their clients.
Beneficiary
The beneficiary is entitled to the proceeds of a life insurance contract. Beneficiaries can be individuals, trusts, corporations, etc.
Cap Rate – Capitalization Rate
A financial projection used in making assessments about an investment under consideration. It means the percentage profit return anticipated on an annual basis. It is calculated by dividing the expected annual profit by the original amount to be invested.
Escrow
A special status where property is held for the benefit of others and will be turned over to another upon the fulfillment of an agreement. In a life settlement, the buyer normally deposits the purchase amount into an escrow account pending the completion of the transaction.
In Force Ledger
The projections of future premium costs, to keep existing in-force life policies going until a stated age or until policy maturity. These are prepared in sales ledger format by the home offices of issuing life insurance companies upon request by the owner or anyone given the authority by the owner.
IRR – Internal Rate of Return
(See ROI and Cap Rate) The percentage profit return anticipated or actually earned on an annual basis. It is calculated by dividing the expected or actual annual profit by the original amount to be or already invested. Synonymous with ROI.
LE – Life Expectancy
An estimate, usually expressed in months, made by medical actuaries as to the average duration that a particular individual is likely to live. These assessments are made based upon demographic statistics as well as a review of individual medical records. Medical actuarial reports are the lynchpin of the life settlement industry. All parties use these studies in combination with other factors to make assessments about every policy under consideration or in a portfolio. The shorter the absolute life expectancy report is, the relatively higher value is placed upon policies insuring that life. There are a number of firms specializing in providing these studies to the life settlement industry
NAIC – National Association of Insurance Commissioners
This acronym refers to the organization of State insurance commissioners who share information and suggest "model" laws to regulate the insurance industry.
NCOIL – National Council of Insurance Legislators
This acronym refers to the organization of State legislators who typically serve on insurance committees in their respective states. This group attempts to encourage information sharing and common legislative proposals affecting insurance regulation and legislation.
Provider
Providers typically receive capital or credit lines from institutional life settlement investors and work with established guidelines as to what type of policies they should purchase for the account of the investor. Providers are required to maintain proper licensure in all regulated states.
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