An amended version of the Viatical Settlements Model Act is headed up to the executive committee of the National Association of Insurance Commissioners.
Members of the Life Insurance and Annuities Committee at the NAIC, Kansas City, Mo., voted unanimously here at the NAIC’s winter meeting to approve the revised model.
To take effect, the model must be approved by both the NAIC’s executive committee and the plenary, the body that includes all voting NAIC members.
The version of the model approved by the Life and Annuities Committee prohibits entry into a viatical settlement contract “at any time prior to the application or issuance of a policy which is the subject of a viatical settlement contract within 5 years after the issuance of an insurance policy unless there are circumstances including: terminal or chronic illness from a viator or insured; the death or divorce from a viator’s spouse; or the viator’s retirement from full-time employment.”
The version approved by the committee states that there is an exception from the 5-year requirement if the viator enters into the viatical settlement contract more than 2 years after the date of the issuance of the policy, and, up until that time, policy premiums have been funded exclusively with unencumbered assets; there is no agreement or understanding with any other person to guarantee any such liability or to purchase or stand ready to purchase the policy; and neither the insured nor the policy has been evaluated for settlement.
Regulators changed the amended model during the meeting in response to concerns about the effects the changes might have on banks and other financial institutions.
“Don’t restrain the ability of banks to make loans for legitimate reasons,” said James McIntyre, who spoke at the meeting for the American Bankers Insurance Association, Washington.
Ohio Insurance Director Ann Womer Benjamin dealt with the concerns by introducing an amendment that states that using life insurance policy benefits as collateral for a bank loan does not create a viatical settlement contract.
Regulators adopted the amendment.