Management by Matrices: Life Settlements - The next sub-prime crisis

"Undeterred by the mess that it created with securitization of mortgages (the Subprime crisis), Wall Street is now working on a new kind of securitization, that of life insurance policies.

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.

... And investors are not interested in healthy people’s policies because they would have to pay those premiums for too long, reducing profits on the investment..."