Life Settlement - Regulation News

The Life Insurance Settlement Association announced the passage of a new law in New York that establishes comprehensive regulation of Life Settlements in that state. The new law introduced at the request of the New York State Insurance Department by Senator Neil Breslin (S66009) and Assemblyman Joseph Morelle (A40009), is based on the National Conference of Insurance Legislators (NCOIL) Life Settlement Model Act.

Assured Fund has warned that “unrealistic” calls for the securitisation of life settlements failed to take into account the complexities involved in such a move.

The Institutional Life Markets Association outlined today the major differences between life settlement securitizations and the securitization of mortgages during testimony before the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

Massachusetts is reviewing DBRS Ltd.’s grades on investments tied to life insurance policies because they might be inflated like the discredited mortgage bonds at the center of the recession.

Yesterday, the Internal Revenue Service issued two Revenue Rulings that constitute the official position of the IRS on certain key tax issues in the life settlement arena. Uncertainty in this area had plagued taxpayers and tax practitioners for years. The guidance is therefore welcomed.

Revised NCOIL-based legislation will be brought up in next session

New York, one of just 10 states where life settlements are unregulated, is unlikely to see a law governing the business until January, when legislators reconvene for their next full session. In June, state lawmakers adjourned without passing legislation that closely followed a model act drafted by the Washington-based National Conference of Insurance Legislators. An earlier bill, proposed by the state’s insurance department and containing a controversial requirement that investors in life settlements register with the department, had been scrapped.

The Life Insurance Settlement Association (LISA) today renewed its objections to the recent amendments to the NAIC Viatical Settlement Model Act, after it was revealed that both the primary author of the model and its key supporter, the American Council of Life Insurance (ACLI), knew that the model act failed to address the problem of stranger originated life insurance (STOLI). LISA has repeatedly raised concerns about the highly unorthodox process and closed-door tactics which were used to develop and adopt the amendments and has held firm that the model does not stop what the NAIC has already identified as the improper manufacturing of life insurance.

The NASD and SEC have stressed over the last year or so the importance of maintaining open lines of communications with the industry and both have been using technology to make those conversations easier.

The National Association of Insurance Commissioners (NAIC) has adopted amendments to its Viatical Settlements Model Act. “This action was taken despite the fact that the model was poorly drafted, did not meet the stated objectives of the regulators and was expedited without having fully considering the issues raised by all industry sectors,” according to Scott J. Cipinko, executive director of the Life Insurance Finance Association (LIFA).
In addition, the adopted changes do not recognize how the life insurance industry and the secondary markets actually operate. “This is just unsettling. The rights of the consumers were not actually considered, and the changes will impair the rights of many life insurance consumers that the Model Act was aimed at protecting,” continued Cipinko.

Sens. Tim Johnson, D-S.D., and John Sununu, R-N.H., introduced a bill Thursday that would create a federal charter for life and property and casualty insurers.
Lawmakers have tried to create such a charter before as an alternative to the existing state-chartered framework. Previous attempts to establish a federal charter, despite industry support, have always failed, though.