Indian Current Affairs: 22.07.2007

In today’s Discover It blog, I have noted something on how India should respond to climate change challenge. Take a look at it here.
Transfer pricing

It refers to the pricing of goods and services within a multi-divisional organization, particularly with regard to cross-border transactions.

This hill station is Uttaranchal was reportedly popularized by a European merchant from Shahjahanpur called Mr. Barron who disclosed its beauty through an article in 1839.

This is one of the most macabre investment schemes devised by Wall Street.
It is the nickname for life-settlement-backed security.
What are “Life settlements”? These are arrangements that offer people the chance to sell their policies (life insurance policies) to investors, who keep paying the premiums until the sellers die and then collect the payout. The sellers sell them because, if they decide to stop paying the premium and surrender the policy back to the issuing life insurance company, they will get very little. So to get a better value for the premium already paid by them, they sell to interested investors.
So in Wall Street the craze now is for investment funds to buy such policies, pool them into bonds, and selling the bonds to pension funds, college endowments, and other professional investors.
Estimates put the figure for this market in 2005 at $10 bn, in 2006 at $15 bn and $30 bn in 2007.
In contrast the size of the mortgage market is $1.9 trillion.

This is similar to the Death bonds that we have just seen above. Viaticals means cash derived from sale of an insurance policy by a terminally ill policy holder. The policy holder is expected to live no more than two years or sometimes a maximum of 5 years.
As AIDS spread during the 1980’s, patients turned to the viatical settlements market to unlock insurance money to pay for their care. But advances in medicine during the 1990’s extended patients’ lives and this market petered out.

Many a time I am asked this question. What is securitization?
Assets (say like the insurance policies that I just now referred above) are pooled together and then sold off in the form of bonds or pieces of bonds. The assets can be anything – insurance policies, debts and mortgages etc. By collecting many different assets, the risk is dispersed. Even if a few don’t pay off, the rest will.

It gathers comprehensive credit information pertaining to both commercial and consumer borrowers, to a closed user group of Members. Banks, Financial Institutions, Non Banking Financial Companies, Housing Finance Companies and Credit Card Companies use CIBIL’s services. Data sharing is based on the Principle of Reciprocity, which means that only Members who have submitted all their credit data, may access Credit Information Reports from CIBIL.

Indian Current Affairs