How the real world influenced The Carnage Account

DEATH BONDS

The Wall Street Practice of Betting On How Long Someone Lives is Real

I was at Lehman Brothers in a new product meeting when I learned about Life Settlements. I had heard about an investment product called Viaticals that were for terminally ill patients. Viatacals were used during the AIDS crisis where doomed patients sold their policy and investors had a short period to wait for collection.

This newer product, Life Settlements, incorporated healthy people, and presented an even stranger way to bet against human life. Just like High Yield Bonds were labeled Junk Bonds, bankers were attempting to package a bunch of life insurance policies into Life Settlement Securities that was quietly being tagged as Death Bonds. Instead of “credit risk” or “interest rate risk” or “prepayment risk” we would now evaluate “longevity risk."

The product fascinated me. I had no desire to sell this to my clients but I knew right away that this had the potential for a great crime thriller. I was in that aforementioned new product meeting asking questions about the confidentiality of the information on the policyholders. How was the information protected? How was this regulated? I’ve since learned that the policyholder’s information is supposed to be confidential "but if you tried hard enough, you could learn anything you wanted - including what brand of toilet paper the insured used.”

I was in the middle of writing my first novel Odd Jobs and while the Life Settlement topic didn’t fit with that story, I knew what my next book would be about.

A news report that starts with a doctor in financial duress that sold a one million dollar policy for one hundred and fifty thousand dollars. This also gives a very quick synopsis on the product:

(Click on image to view)

http://www.nbcnews.com/video/nightly-news/33268420#33268420

There is even a video with Betty White selling you on Life Settlements:

(Click on image to view)

https://www.youtube.com/watch?v=yiCDQW65Q14

Article from Forbes Magazine writing about a scandal:

(Click on image to view)

http://www.forbes.com/forbes/2009/1005/investing-insurance-benefit-life-settlement-roulette.html

Here is a BusinessWeek cover Story called DEATH BONDS

(Click on image to view)

http://www.nbcnews.com/id/19917380/#.VC3-akuUBcR

CNBC show American Greed, quick video explaining the product:

(Click on image to view)
https://www.youtube.com/watch?v=9mOBioDi308

Go Back