A life settlement involves a lump sum payment from an investor to a policy owner in exchange for ownership of a life insurance policy. Seniors often liquidate their life insurance policies for a variety of reasons, such as no longer needing the coverage, health issues, or to finance other products better suited to their needs. The securitization of an $8.4 billion pool of life insurance policies allowed AIG to repay loans to the Federal Reserve, demonstrating the quality and importance of life settlements as a non-correlated investment asset class.

24. AIG Uses $8.4B Life Settlement Securitization to Repay Loan to Fed Posted April 03, 2009 4:32PM An AIG executive said today that the company used a securitization of an $8.4 billion pool of life settlement policies to repay loan to the Federal Reserve Bank of New York. This is the first major rating of a securitization of a life settlement portfolio. David Fields, president of AIG's Risk Finance unit until last month, said that A.M. Best issued high ratings for the policies in the portfolio. The ratings ranged from AAA to A- for the senior and junior notes, Fields said. "We put this securitization in place because rated assets are more efficient for insurance companies to hold than unrated assets," he said. Ratings are used by regulators to determine how much capital insurance companies must hold. The securitization is a big step for the life settlement business. "This is the first rated securitization that's been done with a pool of life settlements," he said. "It demonstrates the quality of the assets and the importance of non-correlated assets as an investment today. " "This is, I believe, the most important transaction for the long-term growth of the market." Emmanuel Modu, an analyst with A.M. Best, confirmed that the agency rated "a huge securitization" of life settlements but declined to confirm that AIG was the owner of the portfolio.