Why Two “Identical” Policies Can Get Meaningfully Different Life Settlement Offers

Advisors who have worked through more than one life settlement transaction often notice something that is hard to explain at first. Two policies that look the same on paper receive life settlement offers that differ dramatically. Same face amount, same product type, same insured age. Very different numbers. Part of the explanation lives on the buyer side, in how institutional funds interpret risk and model returns. But part of it lives in the policies themselves, because two policies that appear “identical” from the outside can have very different economics built in from the day they were issued.

How a Policy’s Cost Structure Affects Offer Value

The secondary market evaluates policies in part based on premium burden, meaning what the buyer will have to pay going forward to keep the policy in force. That figure is set largely at issue and persists for the life of the policy. Two variables drive it.

The first is carrier pricing. Not all policies of the same type cost the same to maintain. Carriers price their products based on their own mortality assumptions and reserve strategies, and a policy from a carrier that was pricing competitively at the time of issue may carry meaningfully lower premiums than a comparable policy from a more conservative carrier in the same period.

The second is the insured’s classification at issue. A preferred plus rating means a lower cost of insurance built into the policy from day one. A standard or table-rated policy carries higher COIs that persist regardless of how the insured’s health evolves afterward. The buyer inherits whichever cost structure the policy was issued with.

For buyers, both variables point to the same outcome. A more premium-efficient policy costs less to carry for the same death benefit, which improves their return at any given purchase price. Two policies with the same face amount can produce different offers based entirely on economics established at issue, before the secondary market ever enters the picture.

Life Expectancy Assessments Reflect Interpretation, Not Just Data

Once a policy reaches the secondary market, the buyer’s offer is built around a life expectancy (LE) assessment from a specialized actuarial firm. That LE figure feeds directly into the pricing model. It determines how long the buyer expects to carry premium obligations before collecting the death benefit, which drives the present value calculation behind the offer.

What is easy to underestimate is how much variation exists at this stage. Life expectancy is not a number that results from inputting medical records into a formula. Different actuarial firms weight conditions differently, apply different mortality tables, and reach different conclusions from the same underlying data. An insured with a complex but stable cardiac history might receive an LE of 84 months from one firm and 96 months from another. That 12 month gap is not an error by either firm. It reflects genuine methodological differences in how mortality risk is assessed.

Because buyers rely on LE reports to build their models, different LE outputs produce different offers on the same policy. A buyer working from an 84 month LE will price more aggressively than one working from 96 months, because the shorter timeline produces a more favorable return at the same purchase price. The policy has not changed. The interpretation of the insured’s mortality has.

Risk Assessment Affects What Return a Fund Requires

Institutional buyers generally target similar net returns across their portfolios, but the return they require on any specific asset shifts based on how they assess that policy’s individual risk profile. Two funds with nearly identical overall targets can still price the same policy differently because they reach different conclusions about the risks attached to it.

Several factors drive that assessment. Carrier financial strength is one. A policy from a lower-rated carrier introduces counterparty risk, and funds weigh that differently. Some absorb it without significantly adjusting their required return. Others demand more yield to compensate, which produces a lower offer for the same policy. Product structure is another factor. A well-designed GUL with predictable, efficient premiums presents a more favorable yield curve than a poorly structured UL with escalating costs. The better the product structure, the narrower the range of mortality outcomes that still produce an acceptable return for the buyer.

Face amount also factors in. Large policies create concentration risk relative to a fund’s overall portfolio, and a buyer already holding significant exposure on a single life or within a specific cohort may require additional yield to justify adding more. Related to this is tail risk, meaning how quickly the investment turns from profitable to unprofitable if the mortality assumption is wrong. A policy where the math only works within a tight range of outcomes is a riskier asset than one with more room for error, and buyers price that difference accordingly.

Portfolio Needs and Timing Shift Appetite

Even when underwriting assessments and risk views are similar, offers can vary based on where a fund is in its own investment cycle at the time a policy is submitted. Institutional buyers operate with defined mandates around the types of policies they hold, the LE distribution of their portfolio, and their exposure across carriers and product types. A fund actively building in a particular cohort will bid competitively on policies that fit. The same fund six months later, fully allocated in that area, may have little appetite for the same policy, while another fund is now bidding aggressively.

This means timing affects offers in ways that are not always visible to the advisor or the client. A policy submitted when buyer demand for a particular product type or LE profile is strong will attract different pricing than the same policy submitted when that appetite has moved elsewhere. The asset is the same. The market it meets is not.

What This Means for Advisors

A single offer reflects one buyer’s view on one day. Getting the most out of the secondary market requires knowing which institutional buyers are active, what they are looking for, and how a specific policy fits their portfolio at that moment in time. The factors that cause one fund to underbid are often the exact factors another fund assesses differently.

If you have a policy situation worth a closer look, Evergreen works directly with advisors and their clients to evaluate secondary market options and manage submissions across a broad network of institutional buyers.