A rapidly changing life settlement market–that includes a growing number of permutations on selling a contract–is prompting life insurers to make their case before state legislatures as proposed legislation on settlements is being considered.
Life insurers are preparing for discussions of bills in New York and Louisiana as well as a hearing by the California insurance department, according to Michael Lovendusky, associate general counsel with the American Council of Life Insurers, Washington.
The ACLI is working with the National Association of Insurance Commissioners, Lovendusky says, but adds ACLI also does not have the “luxury” of just waiting on changes to the NAIC model. The reason, he explains, is because of the activity in individual states.
The bill in Louisiana, H.B. 1314, originally was scheduled to be discussed during a hearing on May 24, but on the evening of May 23 technical changes were made to the existing viatical law that moves it closer to the NAIC model, according to Whit Cornman, an ACLI spokesman.
The bill is sponsored by Rep. T. Taylor Townsend, D-Dist. 23. The ACLI had been concerned the bill would have legitimized SOLI transactions, Cornman says. The changes reduce the list of circumstances under which a life insurance policy can be viaticated in the two-year period after a policy is issued, he explains. That two-year period is in existing law, Cornman continues. The ACLI supported efforts to pass the amendment and H.B. 1314 was passed out of committee, he says.
Legislation in New York, Assembly bill 8785-A and its companion Senate bill 5476-B, is up for consideration by the New York legislature, whose session closes on June 23.
The bill reflects proposed changes being offered by the ACLI to the Viatical Settlement model act of the NAIC, says Diane Stuto, executive vice president with the Life Insurance Council of New York, Albany, N.Y.
It initially was raised last year as a joint effort of LICONY and Coventry Capital, she says. However, this year, because of a divergence in the definition of viatical settlements, that version of the bill will be advanced by LICONY, she says.
LICONY intends to provide legislators with input based on issues raised during the NAIC’s May 3 hearing on the issue (see NU, May 8). Discussion points will include premium financing, Stuto adds.
A two-year prohibition on the settlement of a contract unless it is shown that the viator is terminally or chronically ill is also included in the language, she says.
At press time, a New York insurance department spokesperson could not confirm that the department had submitted its own proposal and could not provide details of the proposal.
Nat Shapo, a senior vice president with Coventry Capital, Fort Washington, Pa., says his firm’s definition of a viatical settlement contract aggressively addresses inducements made to encourage a potential viator to settle a contract.