Goldman offers twist on life settlements

Goldman Sachs has created an index for investors seeking opportunity in longevity and mortality risk. Though investors have been able to access the life insurance investment market through life settlements, these markets have been plagued with transparency problems, according to Ben Woloshin, head of Institutional Relationships at New York-base Goldman Sachs. The investment bank introduced its QxX mortality/longevity index at the RIIA conference in Miami today. The QxX encompasses a set of 46,000 lives of individuals aged 65 and older whose primary impairment is something other than AIDS or HIV. The participants are anonymous. QxX Index Co. LLC will own and operate the index, handling data collection and submitting index pool info to the market participants. A preliminary version of the index was introduced in January and is currently listed on the Bloomberg database. There are two sides to trading on the index: mortality protection sellers are exposed to mortality risk while buyers are exposed to longevity risk. Net cash flows will be exchanged based on the difference between the fixed spread and the actual realized mortality. “Longevity and mortality risk are uncorrelated with established asset classes, interest rates and equity performance,” Mr. Woloshin said. “The index could open the markets to new investors and capital markets as well as provide traditional holders of longevity and mortality risk with much needed risk management tools,” he said.