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At least this scheme isn't as susceptible to systemic risk as the mortgage one that caused the recent crash. Unless a lot of people unexpectedly die of Swine fl
by mixmax 17y ago
At least this scheme isn't as susceptible to systemic risk as the mortgage one that caused the recent crash. Unless a lot of people unexpectedly die of Swine flu, volcanoes or earthquakes of course...
- jonknee 17y agoThose would actually be profitable events as these instruments pay more the sooner someone dies. A cure for cancer or similar medical breakthrough would be really bad news. > "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."
- fnid 17y agoI thought the same thing when I first read the comment, but I believe the commenter meant if too many people die, then the insurance companies won't be able to pay out the life insurance policies and thus the investors will lose money.
- njharman 17y agoNo? Because insurance companies are too big to fail? And insurance companies never invest in other insurance companies, or funds, or in securitized life insurance? If insurance company fails these payments will not occur and the securities will become valueless. If these get nearly as pervasive and out of control as mortgage securities did then a big enough failure will cause they same sort of systemic meltdown.
- mixmax 17y agoExcellent point - I stand corrected...