According to Standard & Poor's, there has been refreshed interest in life settlement securitizations, which the market has been anticipating for some time now. A source close to the developments said that the first term deal of life settlements could close before the end of the year.
At least two potential issuers attended S&P's conference on new assets last week.
However, one source said that credit issues involving Lloyds of London, which has been involved in these deals as a credit enhancer, is just another issue holding up the progress of the sector.
The industry has included securitization in its business model for several years, though deals have yet to surface because of many complications unique to the asset class. The most discussed hurdle is extension risk, as the collateral is essentially a pool of individual bullet amortizers, with undeterminable maturities.
Lloyds had apparently been willing to provide enhancement for extension risk. Unfortunately, because of Lloyds' exposure to the terrorist attacks, its insurance ratings are currently being looked at by the agencies.