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Master Thesis

Le marché des life settlements : principes d'évaluation et gestion de portefeuille

Abstract : For the last two decades, the life insurance industry in the United States has seen the rise of a secondary market, which has been attracting more and more investors. A life settlement is a financial transaction in which the owner of a life insurance contract sells his or her policy to a third party. The purpose of this paper is to present an overview of the life settlement market and analyze it as part of a new asset class. First, we explicit the techniques used for the valuation of a life insurance policy based on the estimation of the insured's life expectancy as well as other medical information regarding his health status. We shall then introduce a new approach based on a rigorous and statistically justified manner in order to incorporate all the medical information in the pricing. Second, we see how fund managers manage life settlement portfolios and offer attractive returns, uncorrelated with traditional asset classes. The performance of such funds can sometimes even go up to two-digit returns. After a brief presentation of the securitization process for this asset class, we discuss the different risks that investors face when investing in the life settlement market and especially exhibit the susceptibility of this secondary market to longevity risk. Finally, we introduce an extension of the classical Lee-Carter model that allows for mortality and longevity jumps over time and use it to forecast mortality rates and analyze the impact on the pricing.
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Master Thesis
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Submitted on : Tuesday, November 22, 2016 - 3:34:24 PM
Last modification on : Friday, October 23, 2020 - 4:56:28 PM
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  • HAL Id : dumas-01073380, version 1



Denis Cabrillon. Le marché des life settlements : principes d'évaluation et gestion de portefeuille. Gestion des risques [q-fin.RM]. 2014. ⟨dumas-01073380⟩



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