AALU VP Discusses Life Settlement Model Provisions

An Association for Advanced Life Underwriting official would like to see regulators at the National Association of Insurance Commissioners change the NAIC’s proposed life settlements model revision.
Tom Korb, a vice president at the AALU, Falls Church, Va., talked about the proposed NAIC model update here during a discussion of the life settlement industry.
The AALU has joined members of the life settlement industry to take issue with some provisions in the revision draft, including a requirement that life settlement brokers put up a $250,000 bond in the states that they operate in.
The AALU and life settlement groups have countered with a proposal for a requirement for a single $250,000 bond that would apply across all 50 states.
During the panel discussion, Korb talked about NAIC model update draft provisions that could ban or sharply restrict the sale of life insurance policies for at least 5 years after policies are purchased.
The AALU has sought exceptions to the 5-year exclusion for cases of hardship and for transactions relating to estate planning and business transfers.
In addition, Korb said, the AALU is seeking changes in a provision in the NAIC model that would allow insurers to rescind a policy if it was evaluated for a potential sale or if the insured’s life span was subject to a predictive model.
The AALU “heard a lot of feedback” about lifespan modeling being useful for estate planners as well as for the parties involved with “investor-owned life insurance,” Korb said.
Korb predicted that the NAIC plenary, or body that consists of all voting NAIC members, probably will vote to adopt the model revision.
The full NAIC “almost always approves” model acts once they have been approved by a committee, as the updated model act for life settlements was, Korb said.
Also during the panel discussion, William Fisher, associate general counsel for MassMutual in Kansas City, Mo., called aggressive enforcement of STOLI arrangements to be carefully regulated.
“I don’t think you can leave this type of enforcement to the market,” Fisher said.
Fisher said comparing the idea that insurers should be solely responsible for rooting out potential STOLI is similar to “saying you should not pass a law against shoplifting” because grocery stores should be able to stop thieves themselves.