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November 04, 2021

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



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...