Posted on 09/06/2009 8:41:48 AM PDT by Lorianne
After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one.
The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.
(Excerpt) Read more at nytimes.com ...
Death panels. Death parties. Death betting.
Oh, and if they lose, the dead’s children will
bail the bankers out.
I read a book about this very thing. These big corporations were buying the life insurance policies for massive amounts, but cashing in on the policy when someone died to make a fortune.
The scary part was that they were getting impatient on waiting for the death benefit, if you know what I mean. It was supposed to be fiction, but seemed very scary. Now it’s even more scary.
It’s as good as the tax for being born (breathing) as is the Cap and Tax....
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
————Want to tell us again, they don’t aim to kill off the elderly and infirmed???? Death Panels were right on target, along with the death books for veterans. Genocide done legal if it passes!
sounds like a zero coupon investment to me - i believe people/companies have been around to buy people’s life policies long before this.
citizens. Maybe we should tell the press this is a conservative idea ( even thought it's NOT) so they can get their outrage up...
Here we go again...
Probably the contracts with MS13 as well.
Counting on the ‘early submission effect’ of the ‘Death Panels’, no doubt.
From the blood suckers who sold securitized bad mortgages. I have no pity for the sellers or buyers of this crapola.
Thanks for that tie in.
Companies have bought Key Man Life Insurance policies for a LONG time. They are bought to provide capital to replace a key research scientist, top salesman, etc.
Many small partnerships buy policies to fund Buy-Sell agreements, and in many instances use cash value policies to do so. If a partner dies suddenly, the beneficiary gets a lump sum so that there are no legal battles for ownership for the surviving partners.
Life Settlements are a relatively new phenomenon, and for the most part, are just used when the need for cash for the insured is more important than the death benefit. For example, a policy might have been bought for estate planning reasons, but financial setbacks have removed the need for the policy. Instead of losing all the premium money the insured sells the death benefit to a settlement investor who will then pay the premiums in exchange for a lump sum paid to the insured.
Unlike mortgages that were packaged, many of which were second, third and fourth speculative holdings, life insurers still only sell a policy when there is an INSURABLE INTEREST. Speculative life insurance is not available.
So the quality of the policy is much better then that of a mortgage. These pooled investments will likely not pay off the way the investors think they will. I might also point out that Berkshire Hathaway has purchased life policies in the past too. One last point: Very few life insurance policies held today qualify for life settlement options. Almost all of them are for wealthy individuals. The issue of the government pushing 'death panel' advice does not play into this at all. There are trillions of dollars of life insurance in force today. I would wager that only 1/10th of 1 percent would qualify for this packaging. As long as insurers stick to the INSURABLE INTEREST standard there is nothing to fear about this. Just put limitations on how much a financial entity can hold of this paper and there is no need to worry.
It became another profit center for them....
I think what is striking is that Life Settlment offers used to be on off-peak hours radio pitches and now it’s becoming a mainstream Wall Street vehicle (it seems).
Shows how desparate times are.
Yeah - this could be Barry Kaye’s rescue.
Barry Kaye is finished. He is effectively out of business. He was the sanke oil salesman of the industry and his approach finally caught up with him.
That doesn’t mean that this market is wrong FOR THE RIGHT SITUATION, which is limited.
All financial products eventually make their way into a packaged product. This one will not be big enough to cause much harm.
They always start out as an infomercial because only a few people see the opportunity at the start. It’s when the larger capital pools come into the market that the large profit margins for the inventors gets eaten away.
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