Wall Street investors have found something new to capitalise on ? your death
Bankers are now reportedly planning to buy ?life settlements? ?life insurance policies from the elderly and the sick. Depending on their life expectancy, they?ll pay around US$400,000 for a US$1 million policy, after which they ?securitise? the policy by bundling it up together with hundreds of other policies into bonds. Those bonds are then sold off to investors, and payments are received upon the death of the persons insured. An earlier death will equate to a bigger return; if the insurance policy holder lives longer than expected, the investor can lose money.
What?s in it for the bankers? The bankers will make their money through all of the transactions involved in creating these life settlement bonds.
Such a trend is likely to have a direct impact on the insurance industry. For starters, an increased number of life insurance payouts will surely lead to an increase in premiums.
Life settlement investments are still in the planning phase, so nothing?s set in stone just yet. But Wall Street has plenty of incentive to pursue this new business angle: the life insurance sector in the US alone is reportedly worth US$26 trillion.
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