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May 19, 2023

A Short History of Tontines

by Kent McKeever - Fordham Journal of Corporate & Financial Law

Kent McKeever

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A tontine is an investment scheme through which shareholders derive some form of profit or benefit while they are living, but the value of each share devolves to the other participants and not the shareholder's heirs on the death of each shareholder.

The tontine is usually brought to an end through a dissolution and distribution of assets to the living shareholders when the number of shareholders reaches an agreed small number.

If people know about tontines at all, they tend to visualize the most extreme form - a joint investment whose heritable ownership ends up with the last living shareholder. The all or nothing nature of that form is memorable.

The last survivor principle has been the basis for a number of dramatic works whose plots hang on the machinations of a tontine participant to murder his co-investors to insure the core property reverts to him.

In fact, tontines are far more innocuous and served as an important step both in developing modem insurance plans and providing some of the earliest reliable actuarial data on which the later insurance plans could be developed.

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