Accelerated Life Settlements

By LARRY B. RITTER

In the world of U.S. life insurance crime is so common that the insurance companies have their own departments of investigation to look into suspicious cases. A special group of companies deals with insurance policies covering end-of-life situations.
First of all, what is a difficult period for the families concerned, is only a
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• Language: English
• Publisher: LitFire Publishing
• Release date: Oct 8, 2019
• ISBN: 9781643986197

LARRY B. RITTER

"Son of an American officer and a German mother, Larry B. Ritter grew up in the US and Germany where his father was stationed. A trainee-program at one of the biggest industrial companies worldwide provided him with lots of practical experience which he rounded up with an MBA in Business. Already during his studies he was a visiting professor at a business school where he got elected school principal. As manager of the Corporate Training department at a leading Silicon Valley company he established links into Stanford University. Later he became consultant of the European president of a US computer company in Geneva and started his own business."

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Accelerated Life Settlements

Copyright © 2019 by Larry B. Ritter

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher or author, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.

Although every precaution has been taken to verify the accuracy of the information contained herein, the author and publisher assume no responsibility for any errors or omissions. No liability is assumed for damages that may result from the use of information contained within.

ISBN-13: 978-1-64398-619-7

Printed in the United States of America

LitFire LLC

1-800-511-9787

www.litfirepublishing.com

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Accelerated

Life Settlements

Hilton Head 2012

Larry B. Ritter

The onion has many layers:

The deeper you cut the more you cry.

Contents

Preface

Act 1: The Game Begins

Scene 1: The First Contact

Scene 2: The Second Stab

Scene 3: The Business Model

Scene 4: A Long Day’s Evening

Scene 5: Understanding the Set-Up

Scene 6: Refining the Plot

Scene 7: Breakfast in Palo Alto

Scene 8: Setting Up the Troops

Act 2: Getting Serious

Scene 1: Lovers’ Complications

Scene 2: Silence before the Storm

Scene 3: A Hurtful Confession

Scene 4: On the Way to Bermuda

Scene 5: The Bermuda Triangle of Tension

Scene 6: A Surprise on the Island

Scene 7: Acceleration

Scene 8: The Poisoned Gift

Scene 9: Changing the Pattern

Act 3: Others Catch On

Scene 1: The Resistance Organizes

Scene 2: Bob’s Second Job Offer

Scene 3: An Old Problem Reappears

Scene 4: Jela Visits her Mother

Scene 5: A House-Hunting Trip to Geneva

Scene 6: Frustration in Geneva

Scene 7: Insider Risks

Final Act: The Game Ends

Scene 1: Taking Stock after Two Years

Scene 2: The Next Hook

Scene 3: The Interim Report

Scene 4: A Visit to the Chicago Institute

Scene 5: Showdown in Calibogue Sound

Scene 6: Unlikely Friends

Scene 7: Total Hush-Hush

Scene 8: Closing the Case

About the Author:

Preface

This thriller takes place in the world of U.S. life insurance, a world where crime is so common that the insurance companies have their own departments of investigation to look into each and every suspicious case.

A special group of investment companies deals with insurance policies covering end-of-life situations and the financial questions that arise from them. Created during the early days of the AIDS epidemic, these companies bought sick peoples’ life insurance policies and provided the sick with the means to pay for their treatment. In financial language, this act is called life settlement’ and means buying back life insurance from the owners. Without any doubt, this service created a number of benefits for the sick and their relatives. Those who were ill, as well as their families, smiled with relief when the companies bought their life insurance policies – usually at prices relatively close to what they had paid into the contract so far. So who is crying here? Where is the problem?

First of all, what is a difficult and emotional period with lots of tears for the families concerned, is only a statistical factor for those dealing with life insurance as a financial market. The life insurance market is called the original or First Market. It deals in its totality with some 1,200 billion U.S. dollars.

The ethical issues are buried in the second layer of life insurance services in the U.S. financial world‚ the Secondary Market.

In this layer, the acquired life settlement policies are sold all over the world as bundled papers, a practice which can have worldwide consequences.

Interestingly, it is the buyers of those life settlement contracts who could be the losers in this game – under the condition that the insured persons survive the end of the contracted period. In a lot of cases – depending on the contractual form chosen - the buyer gets nothing – except a loss in his books. In order to make a profit, the people buying life insurance policies must be reasonably sure that in the vast majority of cases the insured people will die within the contract period. They must be convinced that their statistical life expectancy forecast is extremely well-founded.

This creates a situation in which the Primary Market, i.e. the insurers, and the Secondary Market, i.e. the buyers of end-of-life insurance policies, compete on the basis of the quality of their statistics departments.

Powerful forces find it to their advantage to conceal this situation. One reason is the sheer size of the market: the life insurance market is valued at around half a billion a year. One hundred sixty millions of these policies are eligible for life settlements which means they can be resold. The other reason for secrecy is that the companies buying the policies fear being seen as merchants of death.

To make the situation even more challenging or morbid, a sub-market for terminally ill people (those with less than two years of life expectancy) and policy holders over sixty-five has emerged under the name of viaticals. To those in the know, the term viaticals conjures up the image of hospital coma rooms, death row corridors, or at least hospital beds with monitoring equipment and life support systems.

Those who are terminally ill might feel even worse – if possible – if they knew that they had become a financial commodity to be sold in electronic trading rooms as a wealth management tool for the rich.

While this book is fiction, and deals with fictitious people and their (wrong-) doings, all the financial background has been well-researched and is technically correct.

A very special thanks goes to my friend Cathryn De Wilde who did her best to turn my business English into a text easy to read and to clarify some inconsistencies.

This book was first published on 9/30/2014 under the title of Beschleunigte Lebensabwicklung by the publishing house Verlagshaus Schlosser in Friedberg, Germany. Its rights for German language countries are protected by German Law and the German Writers Association VG WORT.

Feedback or other comments are appreciated: send it to [e-mail]

San Francisco

Fall 2012

Act 1: The Game Begins

Scene 1: The First Contact

Most Americans have heard of Hilton Head Island in the context of its famous annual golf tournament or its beautiful tennis courts. Located in South Carolina, not far away from picturesque Savannah, Georgia, Hilton Head is a semi-tropical haven of sand dunes, beaches, lagoons, salt marshes, as well as moss-covered oaks and lush magnolias.

Skillfully designed by landscape pioneers with a modern vision, Hilton Head has become a forty-square-mile paradise for thirty thousand islanders and more than two million tourists a year. Islanders and tourists enjoy world-class fishing, dining, and golfing, as well as the absence of billboards and flashing advertisements. Exceptional attention to the environment has preserved the landscape’s stunning natural beauty, so it should come as no surprise that rich and beautiful trend-setters from the East Coast flock here for vacations or to buy a house close to a marina or a golf course.

The island’s deep, flat beaches, as well as the minimal tidal variations, mean Hilton Head residents feel protected from the sea. Dikes, jetties and sea walls are all absent. Only the hotels stand a respectful distance of some hundred yards from the beaches. Weathered wooden staircases bridging tidal creeks and salt marshes connect the hotels and the beaches. Signs in the ponds reading Crocodiles spotted here amuse the tourists, but inspire no fear.

In one spot, two houses built directly on the beach, without any protection from the waves, stand out as particularly daring: one is a modern three-story villa; the other, a Fata Morgana, an Italian Renaissance residence that at first glance appears to be straight from a Tuscan hillside. On typical mornings, this latter residence emerges from the fog with its surprising mixture of Renaissance and modern windows, traditional brick-colored tile roof and contemporary glass veranda. The islanders seem unconcerned by its architectural incongruity.

One day in March 2008, this house became the setting for a strange meeting that planted a slow-ticking bomb; a few years later, this bomb shook up the world insurance community.

On this particular morning, several people in windbreakers were walking far out in the shallows of the Atlantic Ocean’s low tide. The wind blew the warm morning fog brewed by the Gulf Stream in gusts across the beach. Occasionally people disappeared, enveloped in a wet cloud. One man stared at his cell phone, typed frantically on it, and slapped it, trying to make it respond.

The few people walking on the beach noted some fishermen on the waterline who were protecting their fishing rods against the warm wind with some plastic covers. Unusually, some fishermen had even set up a small tent.

Other walkers observed a limousine arriving on the inland side of the Renaissance palace. Two smaller cars followed.

When a few people went into the house, two young men in jeans stayed in the entry hall, guarding the entrance. The taller visitor in his thirties with brown hair and steel blue eyes, carried a leather brief case. He was dressed in an expensive business suit, but wore no tie. His tan suggested a sportsman, maybe a sailor or golfer.

The older man, in his early fifties and of medium height, looked more like an unsuccessful accountant: his dark suit needed cleaning, his tie hung carelessly across one corner of an old, white shirt and his grey hair begged to be cut; however, one look into his pale face erased any first impressions of a sloppy nobody. His introduction was a curt, Just call me Jake. Looking into Jake’s colorless eyes, his host saw the clear message to not ask for more.

The host was a tall American-sized Marcello Mastroianni: good-looking, broad shouldered, with grey highlights in his black hair. He was wearing beige pants, and a blue cashmere pullover with matching loafers. A golden chain with an unusual gold amulet provided an Italian touch, but he had the clear-cut, determined movements of a successful man.

Bob will be your contact if we agree to do business. Jake didn’t even find it necessary to point to the younger man. As I do not have much time, Mr. DeSoto, I will come directly to the point.

Without being asked, Jake sat down on the antique couch close to the huge Renaissance fireplace in the palatial room.

He barely glanced at the antique seventeenth century furniture and paintings, but noted all seemed to be originals.

DeSoto hardly managed to get a few glasses on the table and to urge, Just call me Dan, before Jake nodded to Bob to do his part of the talking.

While Dan DeSoto poured the best Irish whiskey he had into three glasses and placed some ice cubes next to them, Bob took an armchair, sat down, opened the leather brief case and took some folders out.

You certainly have a life insurance, Mr. DeSoto.

Call me Dan, please.

Here is a typical life insurance contract as an example.

He put the papers on the table next to the whiskey bottle. Dan DeSoto believed for a minute that the two wanted to sell him a special insurance or something of that kind and was bewildered. He did not even look at the paper.

Do you know that senior U.S. citizens are insured for somewhere around 100 billion dollars? Forty to fifty million Americans have signed a so-called life settlement contract, selling their insurance to a third party - that is, to us.

With these figures on the table, the accountant type leaned forward to rejoin the conversation, as if it was finally becoming worth his time.

Glancing at his watch, Dan saw that his visitors had not even been in his house for five minutes.

Dan, whether the third party makes money has a lot to do with statistics: life expectancy statistics. And this is what we want to talk to you about.

Before Dan could protest, Jake insisted, You and I are grown-ups, so let’s talk straight. Whether someone makes money out of this is only a matter of when the insured people die. All the rest is just standard banking and contractual procedures - and naturally getting the statistics right. I am representing the U.S. banking and insurance industry involved in this statistical game. You are probably the only one who could manage to impact the figures in our favor. Recognizing your credentials, we would like to make you an offer.

Dan stood up to interrupt Jake and gain some time to digest his words. Should I start a fire? Do you want something else to drink? I could use a good drink right now! He served himself and emptied his glass, but it didn’t help. He couldn’t see what was going to happen next, so he stalled for time, I’m not a specialist in statistics and I’d bet you already have the best mathematicians in the world working for you.

Jake just continued, "Statistics are only the result of what