A prominent figure in the life settlements industry promised a “frontal assault” if regulators place a moratorium on the ability to settle a life insurance policy during the first 5 years of a contract.
Regulators at the National Association of Insurance Commissioners, Kansas City, Mo., are considering the moratorium as one of a number of possible responses to concern over the growth of stranger-owned life insurance.
The discussion, scheduled for June 11 during the commissioners’ Life & Annuities “A” committee meeting, follows a public hearing May 3.
At that hearing, CEOs of life insurance companies, life settlement companies and one institutional investing company offered input on SOLI, life settlements and the concept of insurable interest. The remarks were made in conjunction with work to revise the NAIC’s Viatical Settlement Model Act.
If the 5-year moratorium advances, the life settlements industry will propose that for those consumers who want to settle their contracts, the life insurer would have to return 80% of cumulative premiums paid in the first 5 years to the owner of the contract, according to M. Bryan Freeman, vice president-government relations with the Life Insurance Settlements Association and president of Habersham Funding, Atlanta.
An alternate option that will be suggested is to require the life insurer to pay the contract owner the highest amount that could have been realized if the contract had been settled, he continued.
If the value of an owner’s contract is to be taken away, then the owner should be compensated, Freeman said.
The LISA board is aware of the proposal but has not taken official action yet, he added. If the board does act on the proposal, he continues, it could be advanced in statehouses and in Congress, Freeman added.