Public Plan, Private Plan
June 18, 2009
Rock Bottom
June 18, 2009
Consultants To The Mullahs
June 18, 2009
Never Enough Fingers
June 18, 2009
‘I’ve Read LGF- How Can We Trust Them?’
June 18, 2009
Dry Bones: The 3 AM Phone Calls
June 18, 2009
Tale Of The Tape
June 18, 2009
Czartoonist
June 18, 2009
Betting On Life After Death
June 18, 2009
SPECULATING on mortality is a sensitive business. So when a recent conference on the life-settlement industry—which allows global investors to bet on the life expectancy of elderly, ill and preferably rich Americans—was held underneath a Methodist hall in London, one speaker was spooked. “However you think about our industry,” he says, “we are waging in death futures. And we were meeting in what seemed like the crypt of a church.”
Touchy or not, the industry is in bouncy shape. It is even becoming a magnet for those Wall Street alchemists who brought the world the joys of mortgage-backed securities and credit-default swaps. Now they can wager on death as well as default.
Americans have been free to trade their life-insurance policies since a Supreme Court ruling in 1911. In the 1980s a small market took off when AIDS sufferers were enticed to sell their policies to speculators for cash. More recently, the credit crisis has battered the savings of elderly Americans, leaving their life-insurance policies as one of their more valuable assets. Seduced by advertisements, they can sell it to a life- settlement firm for many times the amount they would get if they cashed it in with the insurer. The buyer takes over payment of the premiums in return for the payout when the policyholder dies.
Although that gives investors a financial interest in the seller’s death, it does not, of course, mean Wall Street is about to go around bumping off American pensioners. Rather, the industry believes it can pay more to the policyholders than the life-insurance companies because it has selected those with a high risk of dying soon.
If that sounds morbid, practitioners say it is not much more so than the trading of endowment policies in Britain. But Scott Page, an industry pioneer and chief executive of the Lifeline Program, a life-settlement firm, admits that it is a business full of “headline risk”…
