This is pretty shocking. After the debacle of mortgage backed securities, Wall Street is at it again, it seems. And this time with some new and morally questionable idea of buying and bundling life insurance policies. They make money hoping people will die “early enough”.
From the NYTimes:
The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.
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