The secondary market for US life insurance policies is a niche asset class offering a high risk-adjusted return. To invest successfully, expertise in policy selection is required. Access to policy flow is also essential since the market is purely over-the-counter.
In order to create a well-diversified investment portfolio large amounts of policy data has to be analysed. In doing so, Resscapital uses our proprietary portfolio management system. It allows us to filter policy data and select the most attractive policies.
To realise expected returns from insurance policies, it is essential to have a deep understanding of the longevity risk, statistics, and insurance mathematics. To reduce the longevity risk, Ress Capital cooperates with medical experts. We obtain medical opinion for each policy purchased.
Ress Capital has a conservative approach when it comes to portfolio valuation and risk management. The result is that the actual number of policies that have paid out, consistently exceed our estimates since many years.
Ress Capital investments focuses on life insurance policies with long life expectancies. Based on research, we hold the view that longer life expectancies are more accurate than shorter ones. Therefore, we invest in policies with an average life expectancy of over 10 years at purchase.
Ress Capital actively searches for policies with low future premiums. By purchasing policies with low premiums and low annual premium increases, the longevity risk in the portfolio is mitigated.
With a focus on detailed analysis of policies, Ress Capital mainly purchases single polices in the secondary market for US life insurance, to gradually construct a diversified portfolio.
Using our proprietary portfolio management system, we can analyse large numbers of policies and select the most attractive from a risk-return perspective. This methodology gives us a competitive advantage, since we efficiently can search for policies that fulfils our investment criteria. Ress Capital purchases around 3-4% of the policies that have been reviewed.