What Exactly is this Asset?
Commonly known as a “Life Settlement,” an entity will take beneficial interest of an existing U.S. life insurance policy by purchasing it from Cycladic International at a significant discount to the face value of the policy. They will then hold the Policy until its maturity, paying the applicable premiums, and at the time of maturity they will be paid the full face value of the policy directly by the issuing insurance company. Quite simply, a Life Settlement is the transfer of ownership and beneficial rights of existing life insurance policy for value between a willing seller and a willing buyer.
Normally, life insurance policies are purchased by individuals to insure oneself against particular risk: for example, as a means of providing financial protection for one’s family. The holder of a life insurance policy has insurance coverage during his entire lifetime, which, however, also entails the obligation to make premium payments annually until maturity.
In the U.S., each holder of such a policy has the absolute right to sell his insurance to a third party, as ratified by the U.S. Supreme Court in 1911. The sale provides the insured person with immediate liquid assets, to be used for any purpose. Upon the sale of the policy, the seller will immediately receive the sale price (but remain the person insured), while the purchaser becomes the new owner and beneficiary. When the policy matures, the new owner and beneficiary are paid the face value of the policy by the issuing insurance carrier.