Life settlement trade body voices support for FSA ban

The European Life Settlement Association has backed the FSA after it warned life settlements present significant risks to unsophisticatedretail investors.

Earlier this week, the FSA warned that the products are high risk, toxic products and said it aimed to ban traded life policy investments (TLPIs) from being marketed to retail investors.

TLPIs are known as ’death bonds’ because investors are putting their money into a pooled investment or fund which invests in US life insurance policies. Investors are essentially betting on when a particular set of US citizens will die and if these people live longer than expected then the investment may not function as expected.

Life settlement policies were the underlying investment behind Keydata’s Lifemark products. The collapse of Keydata triggered an industry interim levy of £326m, with advisers paying £93m and fund managers paying £233m.

Michael Fugler, deputy chair of the European Life Settlement Association, says: “I strongly agree with the FSA that historically many product structures sold to retail unsophisticated investors have been complex and opaque and a number of the past products were toxic and should have required a significantly heightened degree of warning and clarity before investment considerations were made.

“But one must remember that in the early stages of this industry there were few laws or regulations which tended to initially attract some unscrupulous people, so, unfortunately the life settlement industry like other industries before it, got off to a difficult start.”