Toomre Capital Markets LLC

Real-Time Capital Markets -- Analytics, Visualization, Event Processing, and Intelligence

Madoff Victims Selling Illiquid Assets And Life Insurance Policies

The Sunday January 11th 2008 edition of The New York Post included an article entitled Antique & Gem Dealers Get Hock Of A Deal. This article has some details about how the victims of the Bernard Madoff Ponzi scandal are selling off their antiques, fine art and jewels in order to raise cash from their high-end collections. "You've got these people who lost all of their investments, but have Rembrandt, Matisse, Van Gogh and Picasso on their walls," said a source close to several victims. Kofski Antiques, a shop in Palm Beach, Fla., has received items from several Madoff victims, said owner Chris Hill, including a 75-year-old who told him, "I was worth in excess of $100 million, and, son, I don't think I could buy you lunch today."

Apparently Mr. Hill also recently put an advertisement in a local paper asking, "Have you been affected by Bernard Madoff, a downturn in the economy, a reversal of income? You may want to contact Kofski." Another ad also openly asks "Madoff victims" if they want to sell their life insurance.

This last line of the article caught the attention of Toomre Capital Markets LLC ("TCM"). In the year plus since it was first posted, the TCM post Appeal of Insurance-Linked Securities and Life Settlements has been quite popular with those looking for further information on this relatively novel sector of the collateralized debt markets. Some have been interested in how these type of investments have had limited correlation with other types of debt and collateralized structured products. Others have been interested in how they might realize more than surrender value from the disposal of an often forgotten asset such as a whole life insurance policy.

As TCM suggested back in November 2007, life settlement firms and the secondary market for life insurance policies have and will likely continue to grow. However, the key impediment to the life settlement industry growth will be what shenanigans, games and false inducements insurance brokers and life settlement firms use to get the most attractive product -- that from elderly retail clientele who sell their life insurance policies in the secondary market. This is an inconsistently regulated market and falls somewhat into both the spheres of insurance and securities regulation.

The relatively wealthy elderly are some of the most vulnerable retail clientele. With their infirmities and failing health and/or judgment, are they really able to handle a smooth, somewhat aggressive and/or pushy salesman who says that their policy is worth X and make an informed judgment that it should not be worth something significantly more? Would it not be a real shame if a victim of Bernard Madoff scandal were to be further fleeced by a less than scrupulous insurance broker?

Hence, Toomre Capital Markets LLC would argue that it is incredibly important to deal with life settlement firms with the highest integrity and approach to this novel business. TCM is proud to recommend our client, Q Capital Strategies LLC, and suggest that you contact them directly should the reader have interest in selling a life insurance policy in the secondary market. Toomre Capital Markets LLC is also happy to explain further to institutional investors how insurance-linked securities are a key component in creating portfolios with more consistent, lower risk-adjusted returns. Please feel to speak with us directly at the contact information listed at the bottom of this web page. Reader thoughts and comments are welcome.