Death Bonds


Businessweek has an interesting story about "death bonds."

Death bond is shorthand for a gentler term the industry prefers: life settlement-backed security. Whatever the name, it's as macabre an investing concept as Wall Street has ever cooked up. Some 90 million Americans own life insurance, but many of them find the premiums too expensive; others would simply prefer to cash in early. "Life settlements" are arrangements that offer people the chance to sell their policies to investors, who keep paying the premiums until the sellers die and then collect the payout. For the investors it's a ghoulish actuarial gamble: The quicker the death, the more profit is reaped. Most of the transactions are done by small local firms called life settlement providers, which in the past have typically sold the policies to hedge funds. Now, Wall Street sees huge profits in buying policies, throwing them into a pool, dividing the pool into bonds, and selling the bonds to pension funds, college endowments, and other professional investors. If the market develops as Wall Street expects, ordinary mutual funds will soon be able to get in on the action, too.

Is it just me, or are there some incentives here that may encourage a bit of foul play? I know I wouldn't trust any investors who profited from my timely death.

At least that obituary/death television channel that is starting up in Germany now has a potential sponsor.

  • I feel a Soylent Green comment coming on…

  • There’s def ancillary opportunities here… :)