Insurance-linked strategies cover a wide range of investments, all of which are based on an underlying with some form of insurance-related risk, e.g.:
Life/longevity (products: US Life Settlements, UK Traded Endowment Polices (TEPs)
Natural Catastrophies: (products: catastrophy (or CAT) bonds, weather derivatives)
Various other (product examples: industry loss warranties, sidecar re-insurance)
What is common to all of those strategies is that the investment returns are with the exceptions of TEPs uncorrelated to capital markets (in the case of TEPs there is a low correlation present). As most investros increasingly look for sources of uncorrelated return, even is this means to be exposed to potentially less liquidity and unfamiliar risks, insurance-linked strategies have recently gained in popularity.
PDL International currently offers strategies and products based on US Life Settlements and UK Traded Endowment Policies.
At the core of PDL International’s offering are insurance-linked strategies. Those types of investments typically include some sort of guarantee at the level of the underlying which means that investors benefit from lower volatility and capital drawdown. Insurance-linked strategies also offer lower or no correlation to capital markets – another major benefit in today’s uncertain world.