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. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

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.

Making money out of people dying does not sit well with everyone, but an argument can be made that if the policy holder no longer feels that their nearest and dearest will need the benefit, or that they no longer want to pay the premiums, then, if there is a willing buyer, it is a financial transaction like any other.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

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