Life Settlement Index
I'm trying to raise awareness about the Amrita Life Settlement Index.
It's a unique index built for the perspective of policy sellers. Each month providers are surveyed to measure their demand for policies on the secondary life insurance market. The format is similar to the well known U.S. Consumer Confidence Index in that providers are not asked about quantitative values but rather month over month comparisons. For example, a typical question would be: Has the number of cases you have received increased, decreased, or remained steady as compared to the previous month? Once the data has been gathered, a proportion known as the "relative value" is calculated for each question separately. This value indicates bullish or bearish sentiment from a seller's point of view. The relative values for all questions are then averaged together to form the index result.
The results along with commentary are posted on the first Tuesday of each month at 10:00 am EST.
Any questions or comments are most welcome.
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Very Interesting
This is great. The life settlement industry sorely needs good market data. Before I get too excited, I have two quick questions:
Great Question
The response rate varies from month to month, but in general about half of the invitations get responses. We send survey invitations to almost every institutionally funded provider.
To answer your 2nd qestion, I'd say the proof is in the pudding. Since it's inception in December of 2009, I think the index has shown a very good correlation with the market conditions that I've seen anecdotally.
What does this measure?
I read your post and visited the website. It is still unclear to me exactly what the index measures. Is it activity, pricing volatility?
Secondary Market Demand
In a nutshell, the index measures secondary market demand.
Are you Tracking Spends?
I would like to know the answer to the last comment as well. Are you tracking dollar amounts spent on life settlements? Does this include tertiary market activity and portfolio transactions?
No Specific Dollar Amounts
No, the questions only measure relative changes from month to month (did things increase, decrease, or stay flat) and never ask for specific dollar amounts. No, the index only tracks secondary market transactions.
Can Life Settlement Brokers Participate?
Can life settlement brokers participate each month? How can a broker get the "more detailed information" mentioned on your website?
Questionaire Aimed at Providers
No, the survey questionaire is designed for providers, so many of the questions would not be meaningful for a broker to answer.
We currently offer the survey's detailed breakdown to survey respondents only. This is a courtesy for their having taken the time to respond.
Helpful Data
The index is interesting. I think the industry would be better served with more of this type of information from both an investor and intermediary standpoint. However, a bit more transparency in your methodology and respondents would help garner additional credibility.
Transparency
As far as transparency goes, we debated how transparent to make the index for some time. The algorithm is proprietary so we have to guard our Intellectual property.
The risk we face in identifying which providers or buyers participate is that we would alienate most of the respondents, all of which don't want any identifying information revealed. So even internally, we don't know or track what providers participate in any given month, or what any respondent says on a survey. Anonymity is really a basis for driving participation.
Investment Options
Are there any direct investment options in the index? Are there any plans to tie derivatives to the index?
Survey Driven
Being similar to the U.S. Consumer Confedence Index, Amrita's index is survey driven. It is not backed by a portfolio of policies. Nor is it synthetically backed like Goldman Sachs' now defunct QXX Life Settlement Index.
So to answer your question: No, there is no direct investment option, nor are there any plans to tie derivatives to the index.