You Bet Your Life: ‘Death Bonds,’ the Investments That Want You Dead

When a new drug regime gave him a renewed lease of life, Morrison began to receive irate calls from the investor who’d bought over his insurance policies.

This is Book Outtakes, a new series of brief essays featuring research the author did for their book, that then didn’t make it into their book.

At a previous job, I had a conversation with a colleague who believed that kidneys should be freely traded on the open market. It was their view that this would be beneficial for everyone involved: The poor would sell their organs to afford food, education for their children, and so on, and the rich suffering from organ failure would be able to buy the extra years they wanted. The heated debate we had marked the beginning of my fascination with the marketization of healthcare, a fascination that eventually drove me to write Suicide Club, a dystopic novel that imagines a world where life expectancies average 300 years and the pursuit of immortality has become all-consuming for the genetically elite. While writing my novel, I researched the ways in which finance and healthcare intersect today, many of which were dystopian in themselves.

Wall Street has never been known for its conscience, but perhaps nothing embodies this amorality quite as starkly as the little-known market of ‘death bonds,’ financial products which allow investors to bet on people’s lifespans through speculating when their life insurance policies will pay out. As the Wall Street Journal bluntly puts it, “returns depend on [factors] such as how many people die in a given year.”

We might think of life insurance policies as one of the boring necessities of life, as uninteresting as an electricity bill or car loan payments (both of which have also spawned entire financial industries based on speculating on them—but that is a story for another day). How, then, did life insurance become a way to make for an investor to make a quick buck? To explain the rise of the ‘death bond’ market, one must return to the viaticals industry, a morally complicated trading of life insurance that first arose in the 1980s, partly in response to the AIDS epidemic. To offer a simplified example of how viaticals worked: A terminal patient has a life insurance policy that will pay out $200,000 when he dies. However, say he needs the money today to support his family. An investor might buy the policy from the patient for $100,000, take it over and continue to make premium payments. When the patient dies, the investor collects the full $200,000 payout. The faster the patient dies, the better the investor’s rate of return. Financial risk is thus directly tied to the patient’s odds of survival and the investor is essentially betting against the patient’s life.

This ghoulish implication became apparent when life-extending medication for AIDS patients was developed in the late 1990s and many viaticals companies were put out of business. In 1998, news outlets reported on the case of Kendall Morrison, a then thirty-five-year-old New Yorker with AIDS who had sold his life insurance policies to viaticals firms five years prior. But when a new drug regime gave him a renewed lease of life, Morrison began to receive irate calls from the investor who’d bought over his insurance policies. “He kept sending me FedExes and calling, which I found morbid,” said Morrison to The Independent in 1998. “It was like, ‘Are you still alive?’”

The advent of life-extending AIDS drugs seemed to spell the end of the viaticals industry. But viaticals soon reemerged in the early 2000s, rebranded as innocuously named ‘life settlements.’ Life settlements worked the same way as viaticals, except they widened their scope significantly, targeting not just people with terminal illnesses but healthy senior citizens as well, effectively increasing the pool of potential targets to include anyone who owned a life insurance policy. Over the past two decades, the life settlement market has grown steadily—financial news outlet The Deal reported that the market grew by 47% in 2016, with $2.14 billion in policies purchased by investors that year. While rebranded, life settlements come with the same disturbing moral ambiguity as their predecessors, in that their profitability remains tied to individuals’ mortality. Time reports: “investors may pick and choose life policies that promise a quicker payoff, based on things like depression and mental illness, or clues from medical staff as to the most ‘valuable’ policies.”

This brings us to the final step in any financial market: securitization. In the heady pre-crisis days of 2006 and early 2007, investment banks began pooling large numbers of life insurance policies into bonds that they then sold to investors. This meant that instead of betting on individual life insurance policies, investors were now buying opaque financial securities that consisted of hundreds or thousands of different policies, allowing them to remove themselves even further from the moral ambiguity of the transaction. And so the ‘death bond’ market was born. Investors were attracted to the diversification they offered, as ‘[t]he number of people who die prematurely or suffer disabling injuries [had] little connection to stock or typical bond prices’ (Wall Street Journal). That is to say, in times of financial crisis, death bonds are likely to remain unaffected by broader economic turmoil. The language surrounding the ‘death bond’ market is chillingly practical, with finance jargon relating to risk and return often obscuring the grim reality of the underlying product.

Today, the ‘death bond’ market is estimated to be $35 billion in size, and investors include some of the world’s largest hedge funds, pension funds, and family offices. Some may argue that while seemingly morbid, the industry provides important financial liquidity to people who no longer want or need their life insurance policies. Yet particularly in a time where Goldman Sachs questions if “curing patients [is] a sustainable business model,” one cannot help but wonder what impact this commoditization of life and death has on our notions of human worth. How far will we allow neoliberal logic to go? What are we, as a society, saying when someone’s life expectancy becomes yet another product to be traded, yet another bet to be taken?