There has been a bit of talk about life settlement securities, or death bonds, as the more socialist inclined like to refer to them. These are securitizations of life insurance policies, sold by the individual who has taken them out to a middleman who has in turn sold it to an investment bank that will securitize the same. Below are some links for more information. I would think that should this industry get going, life insurance companies would simply raise the amount at which the policy holder can cancel the plan to the point that it becomes uneconomical for the securitization process to happen.
Life settlement on Wikipedia
Deloitte’s paper on Life Settlement
Wharton’s research on the consumer benefits of a secondary market (2002)
The Economist examines the growth of the market
From the investor perspective
The death bond article
First deal ever in 1995
Class action law suit from 1998