Posted on 02/28/2015 1:09:32 PM PST by 2ndDivisionVet
When he was seven years old, Max-Hervé George was given a magic ticket by his father. It lets him turn back the clock, to invest with perfect hindsight week after week, steadily accumulating a fortune.
The ticket is a life insurance contract and Mr George, now 25, has fought for years in the French courts to preserve its magic. He could be a billionaire by the end of this decade and, by the end of the next, his contract would be worth more than the insurance company which stands behind it, Aviva France.
There is no mystery to the financial magic, however. Instead it is a story of grand stupidity, of how a French insurer wrote the worst contract in the world and sold it to thousands of clients.
The company was L’Abeille Vie. In 1987 it began to offer a special deal to its richer clients, a Fixed Price Arbitrage Life Insurance Contract.
Life insurance is a popular savings product in France, and typically the customer allocates their money among different investment funds offered by the insurer. But this contract was not typical: prices for the funds were published each Friday, and clients were allowed to switch funds at those prices anytime before the next price was published, even if markets moved in the meantime.
L’Abeille Vie called this an arbitrage, but really it was a gift. Is the stock market up this week? Just call your broker to buy it at last week’s price and pocket the difference....
(Excerpt) Read more at ftalphaville.ft.com ...
How do the rich get richer? They get special deals other people can't for one thing.
Why hasn't the company handled this the good old fashioned way by bribing some members of the French parliament to outlaw contracts like this and then shrug their shoulders and say "We really wish we could continue this contract but our hands are tied by the government. C'est la vie."?
Be VERY VERY careful about those death benefits.....could happen at any time you know WHOOPS....
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