by Ian Mathias: The
Death of Snail Mail
Since it worked
so well the first time around, Wall Street has spawned a new age
of securitization – instead of mortgages, this time it’s
life insurance policies. Before we spit on this one, here’s
how it works:
- A senior
with a high-premium life insurance policy, for one reason or another,
chooses to cash out.
of taking a “cash surrender” directly from the insurance
company, the old fella sells his policy to a “life settlement
- That company
pays him a larger amount than the “cash surrender” would
pay, but not nearly the totality of the policy’s value.
- The company
keeps paying the premiums. When he kicks the bucket, the company
collects the insurance policy.
where the story would normally be over. But now, just like pools
of subprime, Alt-A and prime mortgages, investment bankers are crafting
securitized pools of these insurance polices. Basically, they pool
together a bunch of beneficiaries that will likely die around the
same time, buy up their policies from life settlement companies,
package them into securities and sell them to investors around the
could the idea of “Wall Street” be any more evil right
now? Not only are they rehashing the same schemes that triggered
the credit crisis in the first place, but think about it… they
will make more money the sooner you die! If policyholders die sooner
than expected, there will be no monthly premiums left to pay and
the investors get a bigger share of the insurance payout. (And if
people like our tech analyst Patrick Cox are right, a sudden surge
in life expectancies could blow up these new funds… another
wonder Michael Moore has set his sights on lower Manhattan…
we couldn’t think of an easier target. They deserve each other.
is managing editor of The
5 Min. Forecast and AgoraFinancial.com.
Since working for Agora Financial, respected media outlets including
Forbes.com, the Associated Press, Yahoo, and MSN Money have syndicated
his writing. He received his BA from Loyola College in Maryland
and is currently studying writing at the graduate level.