Somebody took the floor

Enhanced Whole Life, thirty years after it broke, and what changed when an insurer guaranteed the moving part that broke us.

Here is a structure I did not expect to find on a Canadian shelf, and I have only found it once so far.

An insurer offers a guaranteed amount of life insurance for a guaranteed premium over twenty years, at the lowest cost for a guaranteed twenty-pay I can find on the market. Then it funds part of that guarantee with two things it does not control and cannot promise: the dividend its participating pool earns, and the cost of one-year term insurance it buys from a reinsurer. Neither of those is guaranteed. The result is.

So the insurer has taken the floor. Whatever happens to investment markets, to mortality experience, or to reinsurance pricing over the next fifty or sixty years, the amount the family receives does not move.

And then, if the pool does well — and nobody will know how well for a very long time, possibly not until the contract is a claim — the policyholder does well too, out of the same pool, on the same experience. It looks like a product designed by an actuary for a large group of friends all sharing the risk.

I cannot see how they priced it. That is not a complaint. Based on forty years of doing this, I do not know how you do it, and it is the one question I would most like answered. But I have read the contract and run the illustrations, and nothing in either of them is hidden.