The FT (27/02/15) carried an article on a man who holds a life insurance contract with Aviva France. The contract allows him to switch his sum insured between Aviva funds at every week and to make the decision in retrospect. I.e. he can find out which fund has done the best that week and then switch his pension into that fund as of the first day of the week.The FT article can be found here:
http://ftalphaville.ft.com/2015/02/27/2120422/meet-the-man-who-could-own-aviva-france/
Yes, I'd be rich too if I was allowed to do that. This man has been making paper gains of circa 68.8% p.a. Aviva is challenging the contract in court. But if they lose and he lives for a few more years, Aviva France may not (according to the FT article) have enough money to pay out on his life insurance
This leaves me with two questions:
1. Would Aviva plc have to cover the losses should this contract exceed the amounts that Aviva France can afford? A parent does not normally have to cover any losses incurred by a limited liability subsidiary. But there may be guarantees in place or special requirements for an insurance company
2. How bad would the hit be to Aviva plc if the Aviva France alone went under?
I always used to joke that the best investment strategy is to buy tomorrow's newspaper today. Incredibly, Aviva France appears to have given a few lucky investors the opportunity to do the equivalent of that.
