Understanding Life Settlements, and Its Role in the World of Alternative Assets

8 June, 2024

Episode 5 – Chris Winters

My name is Chris Winters. I am the head of portfolio management here at Carlisle. I joined Carlisle in 2015, working with Tim and Jose previously, and several other life settlement related investment products. I’ve been in the life settlement space since 2005, in various positions related to portfolio management or fund structuring. Previous to that, I was in retail investments, private client side in the US dating back to 1999, 2000 time frame. Joining Carlisle in 2015 gave me the opportunity to step in and see Carlisle as a new vehicle created by people that I that I had worked with previously. Very impressively done using all of the experience and the backstory of the industry for the previous ten years. So learning from mistakes of others, watching the evolution of the industry, being proactive about things that we could see going forward. So in my initial arrival at Carlisle in 2015, I was quite impressed to see a structure and an organization that had been put together that was taking most of the greatest hits, if you will, from the industry over the previous decade, and also taking the cautionary tales that were learned along the way as well.

What is the key takeaway for people to understand about the life settlement marketplace and how it plays into the world of alternative assets?
I think the key to understanding the role of life settlements in the general life insurance space in the US is to remember that we’re dealing with a tens of trillion dollar industry, of which, sadly, 90% of policies never reached the pay-out point. So what you’re dealing with a is a huge default ratio or a forfeiture ratio. And that’s because simply the people’s situations change as you get older. Maybe your life insurance is no longer important to you. Maybe your family’s grown up and self-reliant at that point. Maybe you have other needs for the premium outlay that you have right now, and you just can’t afford the policy. Prior to life settlements, the policyholder had no real option for being able to recover the investment that they had put into the policy previously. You know, you were looking at a situation where if you discovered that the policy was no longer applicable for you, then you simply surrendered it and you took maybe a little bit of cash value, maybe nothing. So the life settlements industry essentially created a secondary market, a place where people could recover some of their investment and at the same time for alternative investments, created a the ability to structure an investment vehicle that would monetize that for an investor base, which also is quite interesting because of its low correlation with the traditional asset classes.

Where do you see the industry in 10 years?
Well, I think from my arrival into the space back in the early 2000, you’ve seen a huge amount of refinement of the structures of the investment vehicles and to the styles of the investment managers have. In the early days, people were working off of a very young product, and they weren’t sure exactly what the key points were going to be in order to manage that on a, on an efficient basis. And over the years, through watching the industry evolve, we’ve seen a huge amount of regulatory involvement from a compliance standpoint, both on the on the life insurance side and on the investment vehicle side. We’ve also seen a huge amount of additional visibility. So we’ve attracted institutional investors, where in the early days it was a lot of individual investors that were that were in the life settlement space. Going forward, I see that trend staying the same. The interest from the institutional level has grown quite significantly over the past few years, and I think we’ll continue to do that into the next decade. There’s the industry evolves, too. From a structural standpoint, I see more technology being incorporated into the management process and also just a more streamlined approach, bringing it more into the same level of management that you get in some of the more traditional vehicles that are available.