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Please interpret: american life insurance policies are being sold as an investment here

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BelgianMadCow Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:13 PM
Original message
Please interpret: american life insurance policies are being sold as an investment here
Europeans can buy the life insurance policy of some unknown american and get a double-digit return on their "investment(?)".
You get the dollars present in the policy now, but have to pay a dividend in euros each year or something?

Is this a way for (US) corporations to switch their currency, betting on a dollar collapse?
Is it related to the mortgage crisis, or similar, as this is essentially a transfer of risk? It was presented as betting on the life expectancy of americans, but I think it's a wholly different bet.

It wasn't clearly explained, on belgian state radio, in an interview with a shady dutch policy salesman trying to introduce it in belgium.

Any thoughts?

regards
bmc

PS All of a sudden, the chinese have become the largest shareholders in our biggest bank (Fortis). When the italian De Benedetti tried that, all hell broke loose. Now, it was just announced as "a way to get the funds necessary for the takeover of another bank (ANB-Amro)". Blip.
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TreasonousBastard Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:17 PM
Response to Original message
1. Need a bit more info. It could be a simple reinsurance...
scheme, or it could be something a bit shadier.

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BelgianMadCow Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:21 PM
Response to Reply #1
3. It sounded like reinsurance
but it's private persons that are buying the policies through a "bundler".

:shrug:
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TreasonousBastard Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:52 PM
Response to Reply #3
9. Lloyd's of London is just a...
very sophisticated way to "bundle" insurance risk to indiviuals, so that in itself isn't a problem. Setting up a legitimate "Lloyd's group" isn't uncommon.

But, you say they seem to get the net present value, or cash value, of the policy up front and have to pay a premium. This is being done here with life insurance, housing and a lot of other things and it's usually legitimate. Reverse life insurance, or mortgage, means you are retired and need money now, not when you're dead. So, you sign over your house, life insurance, or whatever else, and get either a lump sum or annuitized payments. YOu then start to just collect the payments. Whoever is putting this together gets your insurance whn you kick off, or your house, or whatever you signed over.

So, some of this stuff is now apparently being sold everseas. Like mortgage bundling, it's a legitimate, just (again like mortgage bundling) scary investment. It all depends on the value of whatever's underlying the scheme.

Everything would have been just fine with mortgage bundling if the crooks diodn't get greedy and push the subprime stuff to people who really couldn't pay. So, I'd be wary of this unless I knew a lot more about it.

Doesn't sound like a tinfoil scheme to control the dollar, just an opportunistic scheme playing with a cheap dollar.




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LoZoccolo Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:17 PM
Response to Original message
2. Sounds like some kind of a rip-off. n/t
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Fredda Weinberg Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:21 PM
Response to Original message
4. It's what they did with sub-prime. Bundle into instruments and
peddle abroad, where you can't easily evaluate the underlying value. Would you buy a stranger's policy as an investment? I wouldn't, but if somebody rated it, there'll be a buyer.
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BelgianMadCow Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:23 PM
Response to Reply #4
5. I feared as much. The "bundle" reference was made and made me go mmmm
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Hand Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:26 PM
Response to Reply #5
6. Yes, it's a probable burn.
I remember a posting here about a small norwegian town that lost a tonne of money from a similar scheme involving subprime mortgages or some similar type of scam. The whole thing melted down and so did their euros (or do they still use kroner?). :puke:
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Snarkoleptic Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:40 PM
Response to Original message
7. Life insurance is a huge rip-off when used as an investment vehicle.
Permanent life insurance like whole life and universal life are a good thing.
The accumulation of cash value or the use of insurance as an investment vehicle, however is just plain stoooopid.
Be careful of the Primerica-type dildos who compare their term (temporary) insurance vs. a competitors whole life (permanent).
You should always compare apples to apples IE. term vs term whereas the industry scumbags would like to compare rates on their term vs. the competitors whole life.
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warren pease Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-14-07 10:47 PM
Response to Original message
8. "betting on the life expectancy of americans..."
With this scam of a health care system, I'd bet that average US lifespans will be in decline for decades. So if that's the risk this weird proposal involves, I'd consider taking the plunge.

On the other hand, my relationship to money is a little odd, so you'd be nuts to take my word about anything financial.


wp
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