Keep 'death bonds' out of Canada
Looking for a really rank way to make some money? Consider "death bonds" - or, more accurately, life settlement securitizations.
The bonds are created by U.S. investment banks that buy up life-insurance policies from policy holders, bundle them together and then sell off smaller portions to investors. The payoff comes when the policy holders die and the investment funds, who’ve replaced them as the designated beneficiaries, collect the payouts.
It's all a ghoulish actuarial gamble: The quicker the death, the higher the profit.
When they first began, life settlements usually involved terminally or chronically ill people selling their life insurance policy to an investor in return for a lump-sum payment.
They first appeared in the earlier days of the AIDS crisis, when many terminally ill people needed cash while still living and were willing to sell their insurance policies for a sharp discount on each $1 of face value.
Although currently a $12-billion market in the U.S., life settlements are almost non-existent here because most provinces prohibit trafficking in life insurance policies. But that hasn't stopped a couple of smaller companies from testing the market over the last couple of years.
Those failed, however, after the Ontario Securities Commission put them under a “cease trade” order for questionable business practices.Still, there’s always the possibility that growing Wall Street demand could trigger a similar push here in Canada.
Tell us: Given the opportunity, would you place such a bet on other people's lives?
By Gordon Powers, MSN Money
Posted by: Rob Barfuss | Nov 4, 2021 1:13:33 PM
Do you own shares of a life insurance company? what's the difference?
Posted by: steve hansford | Nov 4, 2021 1:26:41 PM
How would you like people cashing in on your loved ones who died Rob? Yes Keep this "death bond" out of Canada. Absolutely disgraceful
Posted by: Mike Poettcker | Nov 4, 2021 1:40:02 PM
The article would have been significantly more credible had the author provided a breakdown of who is actually purchasing these "death bonds" (clearly a balanced description)? I suspect the majority of these purchases are insurers seeking a reduction in risk against a life insurance portfolio that has not grown in policy holders at the young end of the spectrum.
But then again, with accurate reporting and descriptions what fun would the article be. Alarmist headlines are so much more saleable.
Posted by: steve | Nov 4, 2021 1:42:33 PM
very true mike
Posted by: steve | Nov 4, 2021 1:46:43 PM
the US govt Investment banks are creating these bonds for sale. So the article states.
Posted by: TROY | Nov 4, 2021 2:32:48 PM
I suppose if the policy holder really needs the money while still alive then what is the harm in it. There is a company in Calgary currently offering this type of investment, but I'd be wary of investing because it doesn't seem to have a very good track record in Canada. I also wish the author of this article would have listed the provinces that prohibit trafficking in life insurance.
Posted by: Pat | Nov 4, 2021 2:35:53 PM
OK so if it becomes available in Canada, will we see a rise in lobbying of government for less affordable, less effective public health care and more expensive private health care so that people will stay sick and die sooner just to increase profits? Hmmm I wonder!
Posted by: Herman | Nov 4, 2021 6:27:31 PM
At $12 Billion this is still actually an emerging market and as such there are going to be some bumps in the road. The reality is that these policies come from a variety of sources including companies that had Key Man policies on executives who have now left those firms and they are looking to recoup some of their money. What the article does not state is that insurance companies on average will only pay out around 4-6% of their life insurance policies. Who really stands to loose from the emergence of this market niche? You do the math.
Posted by: MalcolmSuperstar | Nov 4, 2021 10:46:50 PM
All money is dirty money.
if a Land Rover mechanic charges you $175/hr , you don't charge him $175/hr to build is backyard deck. At one time over 200 years ago was like that. Now every millionaire and billionaire is saddly monopolzing on our value.
to take it from you at the store or take it from you for funeral arrangement, well its the same.. business is business. Ther is always someone to sell their bonds and rssp with full penalties. Its not the buyer, its the stupid low end investor who as no real clue that he or she should not be signing the line.
Saddly the Canadian government allows criminals, lowincome earners and low iQ individuals to be exempt from any penalties that most middle class ($65,000 plus) and upper class experience what a huge loss can hurt ones financial chest.
Posted by: Dale | Nov 5, 2021 5:43:25 PM
If a person who holds a life policy fails to make payments each month, the policy lapses and the policy dies. If the person can't make the payments, why couldn't someone else make the payments, fill the financial void for the policy holder and then change the beneficiary information. Everyone wins. Insurance companies don't lose money, why should you?
Posted by: John | Nov 6, 2021 7:49:38 AM
If insurance salespeople make a living by selling policies and then another person can figure a way to sell the same policy so the insured can make back more than the cash value of his policy while he is still alive, what's the problem. Is the insurance annoyed, because they are being copied . If the insured can retrieve more than the cash value (non--taxable)what's wrong with that. Is it not true that Insuranc companies survive on DEATH BENEFITS don't they? Sounds like somebody was thinking outside the box and ahead of the insuranc companies.
Posted by: Gerald Moore | Nov 10, 2021 11:01:12 PM
I see no problem with investments like this.
Calling them "death bonds' is very slanted, alarmist reporting, that is designed to make them seem terrible, immoral, and other such hot button pushers.
Oh, and Steve Hanford, according to your logic, it should be disgraceful for beneficiaries to cash in on their loved one's policies, as you state "How would you like people cashing in on your loved ones who died?" What do beneficiaries do, cash in on a loved one's death.
And how about funeral directors, whose stock in trade is making money from other people's deaths?