Bankers Look to Buy ‘Life Settlement’ Insurance Policies from Elderly, Ill People

The New York Times recently rang the alarm on an emerging idea that has the markings of the mortgage securities mess all over it.

The paper reported that investment bankers are interested in buying life insurance policies from senior citizens and critically ill people. A $1 million paid-up policy might yield $400,000.

According to the article, the plan is to bundle a bunch of these deals to attract investors looking for the next big windfall:

“The idea is still in the planning stages. But already ‘our phones have been ringing off the hook with inquiries,’ says Kathleen Tillwitz, a senior vice president at DBRS, which gives risk ratings to investments and is reviewing nine proposals for life-insurance securitizations from private investors and financial firms, including Credit Suisse.

” ‘We’re hoping to get a herd stampeding after the first offering,’ said one investment banker not authorized to speak to the news media.”


The idea, Reuters reported, has been around for a long time but went nowhere. Potential profits from these life insurance settlements have kept investors interested. “If a small fraction of policy holders do sell them,” Reuters reported, “some in the industry predict the market could reach $500 billion.”

Golden Gateway Financial is among the companies offering financial advice and services to senior citizens seeking to sell their policies. The company answered frequently asked questions on “life settlements” in press material it provided to media outlets.

Life Settlement Pro is another example of a financial services company marketing information and advice to seniors seeking to sell life insurance policies.

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