Life insurance policies may be the next hit on Wall Street

Once the business with mortgage-backed securities collapsed last year, investment banks on Wall Street began to actively seek another revolutionary way of making money. And it seems to have found in life insurance policies. Bankers plan to buy life insurance policies to elderly and ill people sell for cash. Thus, the investor buys life insurance policies from its owner for an amount less than its nominal value. Example, investment bankers can buy a life insurance policy with a face value of $ 1 million against 400 thousand dollars from its owner. The purchase price will depend on the health of the person and the expected duration of his life. Then will the investment banks securitized these policies, which in other words means that hundreds or thousands of policyholders will be completed together in bonds. Thereafter, the bonds will be sold to large pension funds and other investors. The ultimate purchaser of the bonds secured by life insurance policies will benefit from the difference between purchase price and face value of bills to be paid by life assurance company when the insured persons die. The sooner the insured person dies, the greater will be the return on investment, says New York Times. But in the case that people are living longer than expected, then investors may receive very little profit or even lose money. Both bankers will be a plus because it will benefit from the fees for establishing a bond of their subsequent resale and trading with them. But experts warn the life that these instruments can richer policy premiums. The idea of creating such bonds is still at the planning stage. However, the phones of credit risk agencies that assess the risk of these securities and examine proposals on securitization of other investment banks already overheated by the queries.