A company that buys life insurance policies from the terminally ill hopes to sell investments backed by these policies through banks.

Dedicated Resources, Delray Beach, Fla., buys and resells shares of so- called viatical settlements. Under these settlements, investors buy policies for less than the face value, enabling policyholders to collect death benefits before they die.

Currently, the company sells the investments through financial planners, life insurance agents, and directly to wealthy people. But Dedicated recently hired Alan Blank, president of Midwood Financial Services, an Encino, Calif.-based wholesaler, to pitch the product to banks.

Bank customers are a good target for viatical settlements because the investment has a predictable return, said Michael Zadoff, president of Dedicated Resources. He says the stability of the investment is likely to appeal to bank investors.

"It's probably the lowest risk out there other than a government bond," Mr. Zadoff said.

Before 1988, the arcane world of viatical settlements was a cottage industry, with a small market of sophisticated investors. But the proliferation of AIDS deaths in the late 1980s spurred the viatical settlement market, which Mr. Zadoff estimates at between $700 million and $800 million a year.

The product became more marketable last year thanks to legislation that eliminated income tax on the buyouts.

Because the products are not subject to federal securities regulations, they can be sold by bank platform sales staff. The Securities and Exchange Commission last summer lost a case in a federal appeals court in which the agency claimed the investments are securities.

Though investors may feel more comfortable with the investments now than a few years ago, one bank brokerage president said viatical settlements might not be appropriate for everyone.

"Like a lot of new products, it is not necessarily in the best state for our customers," said Edward Diamond, president of Dime Securities, New York. There are no conforming requirements and the payout time is too uncertain for many investors, he said.

"And, unfortunately, there is a little bit of a negative taint" to viatical settlements, Mr. Diamond said.

Indeed, banks already have a tough time selling traditional investments to their customer base, and would probably face an even bigger challenge selling such a nontraditional product, said Les Dinkin, a retail bank consultant with NBW Consulting, Westport, Conn.

More sophisticated customers of bank trust departments might be amenable to buying the investments, said Richard Ross, a mutual fund consultant at Fifty-plus Communications Consulting, Glencoe, Ill. Trust department customers are generally more educated, and are more experienced investors. But that is a small slice of the bank customer base.

"While there is a market for every investment, I'm not sure how readily bank customers would want to include this in their portfolios," Mr. Dinkin said.

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