There is an increasing trade in life insurance. The idea behind this is that someone sells their life insurance and can enjoy their old age for that amount. The buyer will receive the value of the life insurance policy upon his death. Whether or not a profit is actually made on a life insurance policy depends on how no person survives. Banks and investors are investing in this en masse after the collapse of the mortgage trade. The trade in life insurance is increasing. Bankers seem to have found this as a new investment, instead of mortgages and loans. The idea is that an American’s life insurance policy is bought up. This person will receive a certain amount so that we can continue to live comfortably in his old age. When he dies, the buyer collects the value of the life insurance policy. In the meantime, he also pays the rest of the premium. Roughly speaking, it is best for the buyer to hope that someone dies as quickly as possible so that he makes the biggest profit. Because the longer someone lives, the more premium he has to pay.
Life insurance trade doubles
The life insurance business has doubled in the past few years to $20 billion per year. This is expected to grow to around 100 billion euros per year in the coming years. Life insurance policies are also simply sold in packages, just as happened with mortgages. A certain group of life insurance policies, for example people with a short life expectancy, are then bundled and resold to someone else for a certain price. There are currently ten thousand billion dollars worth of life insurance outstanding in the United States. Of this amount, only fifteen hundred billion was bought off prematurely. Only one percent of the purchased insurance policies are currently freely tradable, so there is still enormous growth potential.
Life insurance new investment opportunity
The American investment banks in New York have also discovered the life insurance business. In September 2009, an article appeared in The New York Times describing this trade as filling the gap left by the mortgage trade. For example, the banks Goldman Sachs and Credit Suisse now have advanced plans to invest heavily in this. Once again, double-digit returns are promised and it is indicated that the risk is limited. In the Netherlands, the company Beukers en Laan and EasyLife in Helmond, among others, are involved in the life insurance trade. However, at the latter company, owner John Wolbers was arrested because he had invested the money in a new car and many other nice things, but not in American life insurance.
Life insurance new bubble?
The Netherlands Authority for the Financial Markets (AFM), among others, is reluctant to trade in life insurance. She fears that a new bubble is being created. But the question is whether major investors listen to that. Thinking sometimes stops as soon as large returns are promised. PME, the pension fund for the metal and electrical industry, already purchased 400 million worth of life insurance policies in 2008.