Aviva France is fighting one of its clients in court over a life insurance contract that could make him a billionaire by the end of the decade.
Called a Fixed Price Abitrage Life Insurance Contract, it was given to the now 25-year-old Max-Hervé George by his father when he was seven. It was the brainchild of L'Abeille Vie, which was later taken over by Aviva France.
Under the contract, George can effectively invest in hindsight – funds are given a fixed price for a week, irrespective of market fluctuations in the meantime. So a fund might be given a set low value on Friday, and by the following Thursday he can invest at that price even if the price has gone up for everyone else.
When George was given it by L'Abeille Vie, trading in this way was not so dangerous for institutions – in the 1980s and early 1990s, fund prices were not published so frequently and trading could sometimes take days.
Indeed, the contracts were given out to thousands of clients at the time, and not just by L'Abeille Vie: Axa and a group now owned by Allianz also offered them, according to the FT.
As trading methods changed and sped up, the contracts were no longer given out, but the banks continued to be tied into the ones offered at an earlier date. To get around this problem, they sent a letter to customers, offering to pay them a small sum to give up the right to trade in this way.
Most people agreed. But around 30 of the contract-holders didn't, and George is one of these. Aviva is trying to bring an end to the terms of his contract at a French appeal court, but if George wins he could be a billionaire by the end of the decade and worth more than Aviva itself after two decades.
Aviva is confident that it will win the legal battle, however. In a statement, it said:
Aviva France strongly contests this compensation claim and believes that the Court will rule against the speculative and excessive compensation levels being sought.