NAIC Committee Adopts Amendments to Viatical Settlements Model Regulation

The Life Insurance and Annuities (A) Committee of the National Association of Insurance Commissioners (NAIC) today adopted highly debated amendments to the Viatical Settlements Model Regulation during the Association’s Winter National Meeting in San Antonio.

The amendments, which were proposed to attack a new emerging type of life insurance practice known as Stranger-Originated Life Insurance (STOLI), would impose a five–year ban on a policy that is financed with the specific intent to be sold to investors. A life settlement is the transfer of life insurance benefits available under a policy. STOLI policies are life insurance policies that are financed and purchased with the intent of selling them for life settlements.

“The action of the Committee stops the abusive practice of Stranger Originated Life Insurance and significantly beefs up consumer protections for those that choose to legitimately sell their life insurance policy to investors,” said Jim Poolman, Life Insurance and Annuities (A) Committee Chair and North Dakota Insurance Commissioner.

The Committee began looking at this type of life insurance practice in May 2006. The life settlement industry has changed significantly since the last revisions to the Viatical Settlements Model, which many states have adopted.

The issue was highlighted at a May 3, 2006 hearing held by the Committee in New York City. More than 300 insurance regulators, industry representatives and interested parties attended the hearing, which featured testimony from financial and life insurance experts, life insurance settlement advocates and consumer representatives.

“Regulators have moved swiftly with input from all interested parties to address the questionable practices in this marketplace,” Poolman said. “Consumers who choose to sell their policy are far better protected by the fraud prohibitions and disclosures under this model.”

About the NAIC
Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and the five U.S. territories.

The NAIC’s overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials. For more than 135 years, state-based insurance supervision has served the needs of consumers, industry and the business of insurance at-large by ensuring hands-on, frontline protection for consumers, while providing insurers the uniform platforms and coordinated systems they need to compete effectively in an ever-changing marketplace. For more information, visit NAIC on the Web at:  http://www.naic.org/press_home.htm