The Study Measures Lapetus’s Actual-to-Expected Results

A comprehensive new study conducted by Professors Daniel Bauer and Nan Zhu has revealed serious flaws in the life expectancy estimates produced by Lapetus Solutions, Inc., highlighting that the company significantly understates the actual life expectancies of insureds. The findings raise serious concerns about the accuracy of Lapetus’s mortality predictions, which could have serious repercussions for life settlement investors.

The study utilized an Actual-to-Expected Deaths Ratio (A/E Ratio) to evaluate the accuracy of Lapetus’s life expectancy estimates, in accordance with the Actuarial Standard of Practice on Life Settlements Mortality (ASoP. 48). The researchers found that the baseline A/E Ratio for the studied population was only 31%. The idea for the study emerged from a discussion hosted by the Life Insurance Settlement Association, where Alan H. Buerger, Coventry’s Co-Founder and Executive Chairman, and Dr. Jay Olshansky, Co-Founder and Chief Scientist of Lapetus Solutions, exchanged insights. A recording of that discussion can be accessed at https://www.lisa.org/blog_home.asp?Display=25.

To conduct the analysis, the study used the 2021 Social Security period life table, which Lapetus has claimed is more appropriate for life settlement underwriting than the select-and-ultimate tables typically used in the life insurance and life settlement industries. The analysis covered a total of 4,378 underwritten reports. Based on Lapetus’s life expectancies, the study calculated that there should have been 648 deaths in the relevant period. However, the actual number of reported deaths was just 203, resulting in the alarmingly low 31% A/E Ratio. This is consistent with a July 2024 analysis that Lapetus life expectancies were shorter by an average of approximately 31 months compared with other life expectancy underwriters on the same data set.

To support their findings, Professors Bauer and Zhu conducted several robustness analyses, including:

• Analysis Using Lapetus’s Own Tables: When applying Lapetus’s individual life tables for a random sample of the underwritten lives, the study found an A/E Ratio of 33%, closely matching the baseline results and reinforcing concerns about the accuracy of Lapetus’s life expectancy estimates.
• Comparison with 2015 VBT Select-and-Ultimate Tables: When the researchers replaced the 2021 Social Security table with the 2015 VBT tables, the expected number of deaths decreased, but the A/E Ratio only improved to 59%.

Across all analyses, the A/E Ratios consistently remained far below 100%, showing that Lapetus’s life expectancies are at odds with actual mortality experience.

In light of these results, Mr. Buerger emphasized the urgent need for Lapetus to reassess its mortality assumptions, underwriting models, and methodologies to provide more accurate life expectancy estimates. “This study confirms that Lapetus’s life expectancies are too short,” said Mr. Buerger. “When policies are valued based on life expectancies that are too short, the resulting policy valuations will be higher than they should be. Funds and companies like Abacus that rely on Lapetus to provide life expectancies for their policy valuations could soon face growing challenges with serious consequences for investors and the broader life settlement industry.”

The full study is available at coventry.com/research.

About Coventry

Coventry is the leader and creator of the secondary market for life insurance. For more than 25 years, we have been driving the industry forward and expanding opportunities for life insurance policyowners. Our deep experience combined with a fierce commitment to consumer rights makes Coventry the clear market leader, a position we use to raise industry standards and expand consumer choice. To date, we have delivered more than $5.7 billion to policyowners who no longer need their policies. To learn more about Coventry, please visit Coventry.com.