Tontine
Tontines enable subscribers to share the risk of living a long life by combining features of a group annuity with a kind of mortality lottery.
[4] Questionable practices by U.S. life insurers in 1906 led to the Armstrong Investigation in the United States restricting some forms of tontines.
[5] The investment plan is named after Neapolitan banker Lorenzo de Tonti, who is popularly credited with inventing it in France in 1653.
He more probably merely modified existing Italian investment schemes;[6] while another precursor was a proposal put to the Senate of Lisbon by Nicolas Bourey in 1641.
[12] Works of fiction (see In popular culture below) often feature a variant model of the tontine in which the capital devolves upon the last surviving nominee, thereby dissolving the trust and potentially making the survivor very wealthy.
[citation needed] A property development tontine, The Victoria Park Company, was at the heart of the notable case of Foss v Harbottle in mid-19th-century England.
Over the next four decades, the Equitable and its imitators sold approximately 9 million policies – two-thirds of the nation's outstanding insurance contracts.
During the Panic of 1873 many life insurance companies went out of business as deteriorating financial conditions created solvency problems: those that survived had all offered tontines.
The profits produced by the tontines' deferred payout structures proved tempting for the issuers – especially the profligate James Hyde.
As the funds in the investment account accumulated, they found their way into directors' and agents' pockets, and also into the hands of judges and legislators, who reciprocated with prejudicial judgments and laws.
[27] In essence, these toxic versions of tontine pensions were effectively (though not literally) outlawed in response to corrupt insurance company management.
[28] When Equitable Life Assurance was establishing its business in Australia in the 1880s, an actuary of the Australian Mutual Provident Society criticised tontine insurance, calling it "an immoral contract" which "put a premium on murder".
[30] In France and Belgium, tontines clauses are inserted into contracts such as ownership deeds for property as a means to potentially reduce inheritance tax.
[37] Informal group savings and loan associations are also traditional in many east Asian societies, and under the name of tontines are found in Cambodia, and among emigrant Cambodian communities.
