Insurance seems straightforward. Consumers pay premiums, and the insurance company invests the excess premiums to make a return that exceeds what they pay out in claims and to cover expenses. In many instances, these investments are in traditional stocks and bonds—investments that are fairly easy to follow and understand.
However, a recent Wall Street Journal article, “Young Financier’s Insurance Empire Collapses,” (subscription required) describes how a young man created a tangled web of millions of dollars of insurance transactions that regulators are still sorting through and has left investors, executives and investigators scratching their heads. The red flags for deception were present, so why was no one paying attention? The article describes in great detail how this young financier used his prodigious financial talent and guile to rapidly build what he hoped would be a multibillion-dollar insurance empire—until it all unraveled.