StoneCross Capital said it has been approved as the first US-based asset management company that creates and customises Shari’ah-compliant insurance-linked longevity products, and provides advisory services to global financial institutions with longevity product initiatives directed to Islamic investors.
StoneCross Capital has taken its proven management strategy and product design in the longevity asset class and has applied it to the principles of Islamic law. In meeting Shari’ah guidelines, StoneCross Capital said it has created an opportunity for institutions in the Islamic community to diversify their holdings and satisfy future product demands using an alternative asset class that is not correlated to any other asset class in the market.
"By elevating its own standards and earning Shari'ah compliance, StoneCross Capital has solidified its commitment to the advancement of the insurance-linked longevity asset class as an alternative investment solution to institutions with limited Shari'ah-compliant investment options," said Todd Gillespie, Chief Investment Officer at Stone Cross Capital.
A longevity asset is an in-force life insurance policy, purchased at a discount of the policy's net maturity benefit but at a premium of the policy's cash surrender value. The market for longevity assets exists because many policy owners would prefer to receive cash from a sale of their policy immediately, rather than the net maturity benefit proceeds their estate would receive at maturity. Often this is because net maturity benefit proceeds no longer meet a policy owner's estate and financial planning goals, or the policy owner no longer is willing or able to pay future premiums.
StoneCross claims that longevity assets have seen tremendous attention from the capital markets in recent years because such assets offer above-average returns that are not correlated with traditional financial markets. Structured insurance-linked longevity assets have no correlation to the equity markets, are immune from real estate value changes, are unassociated with sub-prime mortgage exposure, are not tied to interest rate fluctuation and are separate from commodities volatility. In fact, it says, historical data supports the actuarial assumption that there is zero correlation between mortality rates and the capital markets.
StoneCross Capital's Shari'ah-compliant platform will enable an investor to customise a financial structure that would couple an existing or newly acquired Shari'ah-compliant asset with longevity assets. The percentage of longevity assets would over-collateralise the entire structure and would ensure repayment of the principal and profit of the certificates without relying on the performance of the underlying assets, thus effectively protecting the investor's principal.
“By bundling non-correlated longevity assets with volatile distressed Shari’ah assets such as Real Estate, Sukuk, etc., our financial structure can help an investor to lower their volatility as well as recover their losses in the distressed asset over time. We are providing investors a solution on how to recapture funds that have been marked down due to the economic meltdown with a stable long-term return using our financial platform,” StoneCross said.