New Collateral: Life Insurance Policies

our company hedges its memberships related income stream with Term Life Policies issued by major global insurer. I’d like to bring the following solution to our CFO if the community likes the idea:

the company would pledge Term Life Policies it owns as collateral (an API call into major insurer will confirm the policy is in good standing and that the borrower owns the policy, and the amount of the benefit) and expects 50% Loan-to-Value (70% of which would be locked up in escrow until the member has passed away, as evidenced by a Certified Death Certificate (the details would need to be anonymized)) under the following condition:

  • the member connected to the policy has been declared terminally ill by two licensed MDs or DOs

This would create a credit facility worth a few million dollars in the next few years. Each drawdown would likely be outstanding around 9 to 18 months. In a decade this credit facility could easily be > USD 100 mln.

Looking forward to feedback.

Regards,
T

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Hi @AdrienDLT,

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Considering your post, if i can give my opinion about it.

I don’t think is it a question that we should ask , every member who own share , probably do have private insurance and get covered by them. It’s a tricky question i think, but the family from the share owner should take the decision or not, to accept to take the borrowed remaining load. If this is the point you try to put on the table.

Or, prior to this, the share holder should sign paper according to this kind of situation and then could be proceeded.

Maybe I explained our goal in a confusing way. The insurance benefits go to our company. We purchase and pay for a Term Life policy for each member that joins our community. Instead of going to a bank to borrow against the expected benefits payout from a Policy for a member who is terminally ill, or paying the insurance company for the option to get what is known in the industry an Accelerated Benefit Rider, we would use the MCD market. I’m happy to answer all the questions as they come up :slight_smile:

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@ByThePool I see what you mean.

  • I think from this point of view then, is the ideal. There is way too much that stay in the vault when something bad happen and the bank should not be the beneficial.

You have a good question to debate here, i doubt there will be objection about it. Sorry to misunderstood you.

Have a great evening !

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Hi @ByThePool and welcome to the community,

It is always positive to hear about new ways of using the DAI ecosystem. I must admit that this particular application had not even crossed my mind.

So from what I understand your collateral would be Term Life Policies. These would be placed in a Vault from which you propose to draw DAI to 50% of the nominal value of the collateral. In other words a collateral-to-debt ratio of 200%. When your insurance member dies (as certified by two licensed MDs or DOs) you pay back the DAI drawn and close your position within 9-18 months. Is this a correct interpretation of your proposal?

First of all I will give you thumbs up for an exiting new proposal. In theory I cannot see why it would not work but there are multiple implementation challenges.

  1. The crypto community would need to have access to a market for Term Life Policies. This does not exist yet. Would it even make sense to trade such things using crypto?
  2. Maker would need to set up Oracles (information feeds) at the insurer
  3. Maker would need an Oracle that could feed Certified Death Certificates into the system

All in all a proposal with enourmous potential, but will require a substantial amount of work before it can become practical. I do not wish to answer for the whole community but I feel this is a really exiting case study, but maybe not something we are ready to start implementing in 2020.

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Thank you for the warm welcome. I will think about the comments so far and revert with a more complete proposal :slight_smile:

Cheers,
T

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