At times, investors and owners of mortality based products have faced unforeseen pressures to cash flow, with the most recent threat rooted in carrier COI increases. It’s important to know how much cash reserves are needed to remain liquid, should unexpected costs be incurred.
MLA has provided its clients with a liquidity analysis for this purpose. With a combination of Monte Carlo modeling and stress testing, we are able to calculate the most probable values of cash flow components over the life of a portfolio. This enables us to accurately project future funding requirements on a year by year basis, and identify any likely cash insufficiencies. This, of course, can be run over a variety of different scenarios and stresses to measure the effect of essentially any event impacting the Life Settlement or mortality based product markets.