I was reading an article the other day about Deutsche Bank written by Donna Horowitz.  In it one paragraph states ‘Once Deutsche Bank realized it was going to have a hard time finding enough policies and the policy payouts extended past the 10 year term, the bank should have wound up the fund and returned the money to investors, the investor said.’

How interesting is that – ‘hard time finding enough policies’ – this commentator has for some time believed the massive hype abut securitizations of billions of dollars of policies to be just that ‘HYPE’.

The market that one needs to access to fill such mammoth vehicles is, as I call them, the ‘healthy wealthy’s’ – the top 3 to 5% of the country who can afford policies with high face values.  But there are just not enough of them who will be willing to sell.  This is what led Deutsche to buying ‘wet paper’, even risking the STOLI market.  It’s not just that they need policies, they need big policies and there are not as many of those about as the hype would have you believe.  The real meat of the market comes way down the scale, probably with a face value average below $500K, not $5M.

So in this commentator’s view – nonsense!

Published on 05 Feb 2010 at 07:29 am