Tontine

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Tontine

Describing any investment jointly held by two or more persons in which, when one investor dies, his/her share is reapportioned among the surviving investors. For example, if there are three persons who own a tontine company equally, and one of them dies, the surviving partners then divide the company 50-50. See also: Last survivor annuity.
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Over the years, tontines like King William's became quite
government tontines played an important role in government finances over
After the Civil War, tontines emerged as a popular investment for
the enactment of legislation in 1906 that all but banned tontines, and
A longer and admittedly more speculative answer revolves around the longstanding effort to separate insurance from gambling, a related commitment among insurance practitioners to an understanding of insurance that leaves little room for "spicy" insurance products, the self-conscious transformation of health insurance companies into health care companies, and lingering (but misplaced) concerns about the legality of tontines.
When early 20th century reformers sought to pacify the powerful mutual life insurance companies that profited from tontine life insurance, they used all the rhetorical tools at their disposal--including the conceptual link between tontines and gambling.
LEGALITY We have identified three potential legal concerns about insurance tontines, none of which would apply to a properly designed health tontine.
Second, New York and many other states passed legislation immediately after the 190S Armstrong investigation that prohibited life insurance tontines. Significantly, this legislation applies only to "life insurance companies" and not to health insurance companies (which did not exist at the time of the 1907 legislation).
(14) See COOPER, supra note 9, at 43-57 (discussing the findings of the Armstrong Committee, a committee created by the New York legislature to investigate the life insurance business, which led to legislation virtually banning tontine policies by forbidding insurance companies from deferring dividend payments beyond one year); see also Tom Baker & Peter Siegelman, Tontines for the Young Invisibles, REGULATION, Winter 2009-2010, at 26, available at http://object.
See Sabin, A Fast Bipartite Algorithm for Fair Tontines, supra note 103, at 7-8 (explaining the underlying algorithm).
Unfortunately, it is impossible to reduce the backloading that is inherent in a tontine fund.
In this Section, we propose a tontine annuity that closely resembles a variable annuity.