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+#REDIRECT [[Life settlement]]
-{{Short description|Sale of an existing life insurance policy to a third party}}
-{{More citations needed|date=April 2010}}
+{{R from merge}}
-A '''viatical settlement''' (from Latin ''viaticum'', something received before death)<ref name="def">Entry for "Viatical Settlement" at Merriam-Webster On-Line Dictionary, retrieved November 12, 2012, at http://www.merriam-webster.com/dictionary/viatical settlement</ref> is the sale of a policy owner's existing [[life insurance]] policy to a third party for more than its [[cash surrender value]], but less than its net death benefit.<ref>{{cite web|url=http://www.lisa.org/content/13/What-is-a-Life-Settlement.aspx|archive-url=https://web.archive.org/web/20160304200122/http://www.lisa.org/consumer-advisors/life-settlement-basics/defining-life-settlements|archive-date=2016-03-04|title=Defining a life settlement|website=lisa.org}}</ref>  Such a sale provides the policy owner with a lump sum.<ref name="LISA History">Life Settlement History, Life Insurance Settlement Association, retrieved March 4, 2012, at http://www.lisa.org/content/51/Life-Settlement-History.aspx</ref>  The third party becomes the new owner of the policy, pays the monthly premiums, and receives the full benefit of the policy when the insured dies.<ref name="LISA History" />
-Viatical settlements are ordinarily sold by, or on behalf of, an insured who is terminally or chronically ill.<ref name="LISA History" /><ref>{{Cite journal|last=Xu|first=Jiahua|date=2020-01-02|title=Dating Death: An Empirical Comparison of Medical Underwriters in the U.S. Life Settlements Market|url=https://www.tandfonline.com/doi/full/10.1080/10920277.2019.1585881|journal=North American Actuarial Journal|language=en|volume=24|issue=1|pages=36–56|doi=10.1080/10920277.2019.1585881|s2cid=59483358|issn=1092-0277}}</ref>  As medical advancements improved the lives of those persons living with terminal or chronic illnesses, the [[life settlement]] industry emerged.<ref name="LISA History" /><ref name=":0">{{Cite journal|last1=Braun|first1=Alexander|last2=Cohen|first2=Lauren H.|last3=Malloy|first3=Christopher J.|last4=Xu|first4=Jiahua|date=2018-06-05|title=Introduction to Life Settlements|url=https://www.hbs.edu/faculty/Pages/item.aspx?num=54582|journal=Harvard Business School Background Note|language=en-us|issue=218–127}}</ref>
-Viatical Settlement as a term is considered out of date.{{By whom|date=August 2021}} The industry uses [[life settlement]] as the formal terminology. Technically, a viatical is a life settlement where the insured has less than two-year life expectancy. However, some jurisdictions, such as the U.S. state of [[Maryland]], use the term viatical settlement instead of life settlement in their regulatory documents.<ref>{{cite web| url=https://insurance.maryland.gov/Consumer/Documents/publications/viatical.pdf#page=2 | page=2 | title=Understanding Viatical Settlements}}</ref>
-==History==
-Viatical settlements grew in popularity in the [[United States]] in the late 1980s, when the [[AIDS]] epidemic peaked.<ref name="LISA History" /><ref>{{Cite journal|last1=Braun|first1=Alexander|last2=Cohen|first2=Lauren|last3=Elvedi|first3=Mauro|last4=Xu|first4=Jiahua|date=2019-06-27|title=ClearLife: From Prospect to Platform|url=https://www.hbs.edu/faculty/Pages/item.aspx?num=56253|journal=Harvard Business School Case|language=en-us|issue=219–119}}</ref>  The early victims of [[AIDS]] in the U.S. were largely gay men, typically relatively young and without wives or children (the traditional [[beneficiaries]] under a life insurance policy), but often covered by life insurance through employment or as a result of investments.  The beneficiaries under the policies were often their parents who did not need the money.  Viatical settlements offered a way to extract value from the policy while the policy owner was still alive.<ref name=":0" />
-At the time, the AIDS mortality rate was very high, and life expectancy after diagnosis was typically short.<ref name="LISA History" />  Investors were reasonably sure that they would collect in a relatively short time.  This combination of events caused a surge in viatical settlements as investors and viators saw an opportunity for mutual benefit.
-A [[U.S. Supreme Court]] decision from 1911 provides the legal basis for viatical settlements.<ref name="LISA History" />  In Grigsby v. Russell, 222 U.S. 149 (1911), Dr. A. H. Grigsby treated a patient named John C. Burchard.<ref name="LISA History" /> Mr. Burchard, being in need of a particular surgical operation, offered to sell Dr. Grigsby his life insurance policy in return for $100 and for agreeing to pay the remaining premiums.<ref name="LISA History" /> Dr. Grigsby agreed and as a result, the first viatical settlement transaction was created.<ref name="LISA History" /> When Mr. Burchard died, Dr. Grigsby attempted to collect the benefits.<ref name="LISA History" /> An executor of Burchard's estate challenged Dr. Grigsby in Appeals Court and won.<ref name="LISA History" /> The case eventually reached the U.S. Supreme Court where Justice [[Oliver Wendell Holmes Jr.]] delivered the opinion of the court.<ref name="LISA History" /> He stated in relevant part that <blockquote>“So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner's hands.”<ref name="LISA History" /></blockquote>The Supreme Court's decision set forth the fundamental principle upon which the viatical settlement and later, the life settlement industry were based: a life insurance policy is private property, which can be assigned at the will of the owner.<ref name="LISA History" />  Viatical settlements were rare for almost eight decades until the onset of the AIDS epidemic.<ref name="LISA History" />
-Early improper activities among a few bad actors produced a fear among consumers regarding viatical settlements.<ref name="LISA History" /> {{Weasel inline|date=July 2019}}  Life insurers became concerned about individuals purchasing policies purely for speculative purposes.<ref name="LISA History" />  Today, many states regulate viatical and life settlements and many more are developing legislation and regulations.<ref name="LISA History" />  As of June 2011, the only states that do not regulate viatical settlements are [[Wyoming]], [[South Dakota]], [[Missouri]], [[Alabama]], and [[South Carolina]].<ref name="map">Regulation, Life Insurance Settlement Association, retrieved March 4, 2012, at http://www.lisassociation.org/vlsaamembers/legislative_maps/images/Reg-of-viatical-and-life-se.jpg{{Dead link|date=March 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>
-Despite the bad experience of some investors, viatical settlements remain an often valuable tool for the personal financial management of many ill people.  A 2002 study showed that among hospice financial counselors who have had experience with viatical settlements, most report positive experiences.<ref name=ign>{{cite journal |vauthors=Badreshia S, Bansal V, Houts PS, Ballentine N |title=Viatical settlements: effects on terminally ill patients |journal=Cancer Pract |volume=10 |issue=6 |pages=293–6 |year=2002 |pmid=12406051 |doi=10.1046/j.1523-5394.2002.106002.x }}</ref>
-==Notable cases==
-===Mutual Benefits===
-One of the most infamous viaticals cases involved the [[Mutual Benefits Corporation]] headed by Peter Lombardi and run by Joel Steinger. The Florida company purchased life insurance policies from people with HIV, and sold shares in the future proceeds to 28,000 investors. In 2004, the [[U.S. Securities and Exchange Commission|Securities and Exchange Commission]] closed the firm saying it was a $1 billion [[Ponzi scheme]].  Lombardi and Steinger received 20-year prison sentences.<ref>{{Cite web|last=Writer|first=IAN KATZ Staff|title=Accounting firm to pay $3.5 million|url=https://www.sun-sentinel.com/news/fl-xpm-2007-07-07-0707060323-story.html|access-date=2021-09-14|website=Sun-Sentinel.com|date=7 July 2007 |language=en-US}}</ref><ref>{{Cite web|title=Former executive of Mutual Benefits Corp. gets lengthy prison sentence for insurance fraud|url=https://www.bizjournals.com/southflorida/news/2014/08/29/former-executive-of-mutual-benefits-corp-gets.html|access-date=2021-09-14|website=South Florida Business Journal|language=en-us}}</ref>
-===Kelco===
-In August 2008, Stephen L. Keller, the former CEO of Kelco Inc., filed a motion in the [[United States District Court]] for the Eastern District of Kentucky, with Judge [[Karl S. Forester]], to dismiss Keller's convictions for conspiracy, fraud, and money laundering.  Keller's convictions resulted from Kelco buying and selling life insurance policies that in some cases, had been falsified by 3rd party insurance agents, for insureds with HIV/AIDS applications, then buying the policies in a viatical settlement.<ref name=":0" />  Keller's motion was denied on November 12, 2010.  His appeal of that denial was also denied, on February 28, 2011.<ref>{{Cite web|url=http://ky.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20110228_0000161.EKY.htm/qx|title=Find a Case|access-date=2013-06-21|archive-date=2016-03-06|archive-url=https://web.archive.org/web/20160306180449/http://ky.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20110228_0000161.EKY.htm/qx|url-status=dead}}</ref>
-== Viatical settlements valuation ==
-Viatical settlements are valued by examining market prices according to the ‘fair value’ approach using closed viatical settlement transactions. Market data is collected from multiple providers and that information is available to clients as well as third parties.<ref>{{Cite web|date=2017|title=AAP Life Settlement Valuation – Manual|url=https://www.aa-partners.ch/fileadmin/files/Valuation/AAP_Life_Settlement_Valuation_-_Manual_V6.0.pdf|website=AA-Partners Ltd.}}</ref>
-Like life settlements, the pricing of viaticals relies on the quantification of two main variables: the insured's life expectancy and the internal rate of return (which reflects the heightened risk associated with viaticals settlements compared to other assets). The actuarial literature presents various approaches to pricing viatical settlements, including deterministic, probabilistic, stochastic, and fuzzy methods.
-<ref>Zollars, D., Grossfeld, S., Day, D. (2003). The Art of the Deal: Pricing Life Settlements. Contingencies, January/February, 34-38.</ref>
-<ref>Lubovich, J., Sabes, J., Siegert, P. (2008). Introduction to methodologies used to price life insurance policies in life settlement transactions. Social Science Research Network (SSRN). https://doi.org/10.2139/ssrn.1567264</ref>
-<ref>Stone, C.A., Zissu, A. (2008). Using Life Extension-Duration and Life Extension-Convexity to Value Senior Life Settlement Contracts. The Journal of Alternative Investments, 11 (2), 94-108. https://doi.org/10.3905/jai.2008.712600</ref>
-<ref>Brockett, P.L., Chuang, S.-L., Deng, Y., MacMinn, R.D. (2013). Incorporating longevity risk and medical information into life settlement pricing. Journal of Risk and Insurance, 80 (3), 799-826. https://doi.org/10.1111/j.1539-6975.2013.01522.x</ref>
-<ref>Andrés-Sánchez, J. de; González-Vila Puchades, L. (2023). Life settlement pricing with fuzzy parameters. Applied Soft Computing, 148, 110924. https://doi.org/10.1016/j.asoc.2023.110924</ref>
-== References ==
-{{reflist}}
-== See also ==
-* [[Life settlement]]
-* [[Death bond]]
 [[Category:Life insurance]]