A Study Of The Risks In Life Insurance Viatical Settlement

America is a developed country in insurance industry. As the population ages was coming and the rising medical costs, the economic burden of many olders' families and terminally ill patients were very heavy. In the 1980s, the viatical settlement appeared to help those people relieve heavy economic burden. After 20 years of development, viatical settlement has been a well-known investment tool of western due to it's high yield, low credit risk, little impact of the economic cycle and tax preferential. We can say that the original purpose of viatical settlement is nice and pure. But with the development of American viatical settlement market being to mature, its operation procedures also being gradually complicating, such as increasing departments, various forms, the changing motives of deal, which arise a series of problems such as fair derivatives based, legal regulation and supervision mechanism, etc.Our country has not open the viatical settlement market, but the demand of it is obvious, on the one hand is the demand of the old insurants' improve their financial status, on the other hand is investors' pursuing high yields. Moreover, in some developed coastal areas have not normative but underground viatical settlement trade and the trading commodities mostly come from American and Hong Kong of China, so investors have a very limited understand with the hidden risk.My paper aims to make an analysis and discussion about the hidden risk,fraud in trade and related laws and regulations (including the U.S. laws related viatical settlement and the relevant provisions of the institutional constraints of our country "insurance law")of viatical settlement for investors to take attention and reduce the possibility of loss, meanwhile, to hope it can brought to the forefront of Regulators and the legislative branch.This paper first introduces the origin and development of viatical settlement, in order to make readers understand its historical background and development, then illustrate ways of operating,process and the main body participation in practice of viatical settlement. Of course the key point of the study is the risk involved, of which we have classified two types, one for the insured's, and one for the investors. The main focus of this thesis is the risks of the investors. Another area of focus is the personal factor which lead to risk to investors. In fact, this kind of risk is the main risk to investors. Case of America's biggest viatical settlement company-MBC collapse directly reveals the fraud risk to show investors and regulators. Then, another subject of this thesis is the risk for investors is incomplete laws and monitoring of viatical settlement in the US. The federal and state governments in the US have different governing methods, which also leads to increased risk to investors. The good news is the US federal government has not ignored the problem and has created more extensive settlements is worth studying and to be learned from. At the end of the paper, I present the most direct legal issues which may lead viators and investors to face certain risks in future when our country introduce viatical settlement in the current conditions of insurance law. Therefore, I give advice on these issues through using the advanced experiences of related America's laws.In this paper, what I study only refers to theoretical research, but no empirical research. The whole article mainly adopts literature material method, combining with the method of comparison on American viatical settlement system and risk (transaction risks and laws). At the end of the paper, I give conclusion to the trading risk and legal risk respectively, and table proposals about the future development of China's viatical settlement transactions in the aspects of system of keeping watch risks, such as the transaction should be directly be securitization, insurance regulations should be increased and amended, etc.Because viatical settlement is not permitted in our county, there is no specialized institution operate and supervise viatical settlement commodity, so it is hard to check the condition of investors'profit and loss and obtain foreign literature, making me gaining only very few of statistical data, so in this paper, I just discuss the possible risks in process of viation, but no statistical description about the actual loss risk which the investors may face to.