Executive Summary
This post is a continuation of our analysis on COVID-19’s impact on Life Settlements.
Life settlement excess mortality is in decline. Life settlement lives experienced lasting protection from pandemic-related mortality in 2021. We expect COVID’s impact on life settlements will continue to decline in the coming months outside of mild increases driven by future variants of the virus.
Life Settlement Excess Mortality
Life settlement excess mortality was in decline through the end of 2021 (the most recent data available). We compared actual Life Settlements mortality to our pre-COVID forecasted mortality (Figures 1 and 2) to arrive at this conclusion. We continue to use a triple exponential smoothing (a.k.a. Holt-Winters) model to forecast expected monthly mortality rates using the last 5 years of experience. “No-COVID Forecast” is the product of these forecasted mortality rates and the number of insureds in our population alive at the start of each month. Actual deaths above this line are considered excess and presumed to be caused, directly or indirectly, by the COVID-19 pandemic. The population used here and in our previous analysis is all lives that have received a 21st underwriting.
This decline in excess mortality was not seen at the national level (Figure 3). Despite the vaccines, reported US COVID deaths were high during the final four months of 2021, as the Delta variant spread through the country. This wave saw more COVID deaths than any other outside the winter 2021 peak.
We estimate a total of 683 pandemic-related deaths in 2020 and 249 in 2021 out of our dataset of approximately 65,000 life settlement lives. This represents a net 12% increase in life settlement mortality throughout the pandemic.
Life Settlement Protection
For nearly two years, we have been tracking how life settlement outcomes compare to the general population. To do this, we created a No Protection Estimate which is our expected number of pandemic-related deaths based on insureds’ ages, counties of residence, and reported COVID deaths in those counties. If observed excess mortality falls below the No Protection Estimate, we say that life settlement lives have “protection.” The greater the divergence, the greater the implied protection on Life Settlements. Our analysis does not offer any insight into the underlying cause of this protection, but it might be explained, for example, by higher wealth, better access to health care, or higher vaccination rates.
Throughout 2020, we found no evidence of protection in Life Settlements. Life settlements excess mortality tracked closely with the No Protection Estimate.
That changed with the release of COVID vaccines. As we noted in our last article, life settlements demonstrated substantial protection in the first half of 2021, likely because of the vaccines and their age-stratified release.
Surprisingly, this relative protection on Life Settlements remained steady even as the vaccine became available to the public at large. In Figure 4, we see a consistent divergence between the No Protection Estimate and actual excess mortality. In Figure 5 we also see a difference between the percentage mortality increase in life settlements and national seniors, where the percentage mortality increase for national seniors is calculated as the difference between the average national mortality of 65 years old + from 2015 to 2019 and national mortality of 65 years old + during COVID. This suggests that Life Settlements is experiencing lasting protection against COVID. This lasting protection might be explained by some combination of higher vaccination rates in life settlements, improving therapeutics which are most accessible to wealthy individuals, and greater flexibility to avoid exposure during pandemic waves. Whatever the underlying causes, life settlements mortality going forward is unlikely to be particularly sensitive to the behavior of the virus.
The Future of COVID
The pandemic may be cooling down and entering an endemic phase, where the virus persists throughout the world but no longer dramatically interrupts society the way it has for the past two years. Despite a more contagious Omicron subvariant (BA.2) spreading in parts of Europe and now the U.S., many experts are not predicting an imminent U.S. wave. This is in part because a large number of Americans were recently infected by Omicron. When we do get another wave of COVID, by this or some future variant, we are much better equipped with high levels of protection by vaccine and prior infection and medicines for treatment. [1, 2]
We think COVID’s impact on Life Settlements will diminish further over the coming months, with temporary increases when the virus is more actively spreading in the country. In time, we expect the virus to slightly raise the background risk of mortality in Life Settlements.
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