As we mentioned in our last article about the possibility of monetizing an insurance wrap, which is slim, we are going to into detail why this is a fault of brokers across the world which have believed a myth.
Insurance wraps are a nice way of saying an insurance policy for an asset which is worth a lot of money. The belief is an owner of gold mine or other type of in ground asset can be insured or "wrapped" for a certain percentage of the mine and then the wrap is then monetized or transferred into cash to place into a private banking program.
How do you monetize and insurance wrap? The correct question would be, "what lender is going to lend cash against the wrap"? From our point of view there is not a lender today which is willing to lend against an insurance wrap because of the risks involved. On of the reasons is the insurance wrap is not an asset, but a policy. For example, would a lender lend against a life insurance policy? They wouldn't. Would the lender lend against whole life policy? That is a maybe, because a whole life policy builds up cash and as many know is probably the worst of life insurance policies.
In summary, the probability of a lender lending against an insurance wrap is nil. So why do so many brokers try over and over to get an insurance wrap monetized? We will leave that up to the reader to figure that one out.
