Gone4Good
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Sep 9, 2005
- Messages
- 5,381
Article here.As insurers reach the limit of how much pension-fund liability they’re willing to shoulder, companies such as JPMorgan and Prudential Plc (PRU) last year set up a trade group aimed at establishing and standardizing a secondary market for so- called longevity risks. They’re also developing indexes that measure mortality rates and securities to let pension funds pay fixed premiums to investors in return for coverage against major deviations from projections.
This reminds me a bit of the early/mid - nineties when investment banks were buying up the life insurance policies of AIDS sufferers, securitizing them into bonds, and selling them to investors. The selling angle for the bonds was that these securities were really helping because it gave AIDS patients money upfront that they weren't entitled to until after they die. It was a fair point. But it also created an entire class of investors who were essentially rooting for people to die (investors lost money when the AIDS victims lived longer than forecast, or heaven forbid, didn't die at all. They'd clean up if the pool of people associated with their bonds all died early). With the new drugs that came out later that decade, these folks all lost their shirts and the market essentially vanished.
It will be interesting to see who steps up to bet against medical innovation this time. Or maybe, if these securities take off, we'll get a plurality of voters with a financial incentive to institute 'death panels' for real.