waxwing
· 1d
Read about the 30 maidens of Geneva.
Quite remarkable. However stupid you think the bureaucrats running your life are, they'll struggle to compete with late18th century France.
It's actually a perfe...
Context:
The background: In the 1770s–80s, the French crown, desperate for cash, sold life annuities. You paid a lump sum, and the state paid you a fixed income for as long as the named person (the "life") survived. Crucially, under finance minister Necker, the price was flat, the same regardless of the age or health of the person on whose life the annuity was written. The pricing implicitly assumed a typical buyer, roughly a 50-year-old purchasing on their own life.
The exploit: Genevan bankers realized the annuity didn't have to be on your life. So they screened for the longest-lived people they could find: young Genevan girls, around 5 to 10 years old, from healthy families, who had already survived smallpox (a huge mortality filter at the time). They bought annuities on these girls' lives, then pooled them, famously in groups of 30 girls, to smooth out individual mortality risk, and sold shares in the pools to investors as a securitized product. A girl who lived to 70 meant the French state paid out for six decades on an annuity priced for someone expected to die in twenty years.
