The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.

Death bonds: The perils of sub-prime death

The US secondary market in life insurance is being extended to sellers who can ill afford to relinquish their policies.

Life settlements, whereby people over the age of 65 can cash in their life insurance policies with a third party, are, on the surface, a means of creating a more efficient market. A senior no longer wanting to hold a policy can sell it to a life settlements buyer rather than allowing the policy to lapse or cashing it in with the life insurance provider for a small amount. The buyer then pays the premiums for the rest of the policy’s life – that is, until the seller dies – and then collects the benefit (hoping that the seller dies sooner rather than later).

It is a small but growing market, with many banks looking to join in and potentially securitize the underlying policies and sell so-called death bonds. The secondary market is growing by about $1 billion a year in the US, and some forecasts suggest that it will be a $160 billion market in several years.

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to and analysis and receive expertly-curated updates direct to your inbox.


Already a user?

Login now


We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree