In a surprise vote, an amended Viatical Settlements model act draft was unanimously approved by the Life & Annuities “A” Committee of the National Association of Insurance Commissioners and will now be returned to the NAIC’s executive committee and plenary for possible full adoption in June.
Reaction to the decision fell largely along industry lines, with representatives of the life settlement and life premium finance industries expressing dismay and life insurers voicing satisfaction. One producer group said it was pleased action was taken but that further consideration is needed before the model is adopted by the full NAIC committee.
The surprise 11-0 vote took place on April 2 during a conference call with over 60 participants. Following discussion by representatives in which 5 new amendments were adopted, New Hampshire Commissioner and NAIC Vice President Roger Sevigny called for a motion to move the amended model draft out of “A” Committee. North Dakota Insurance Commissioner Jim Poolman, who had spearheaded the development of the draft, seconded that motion.
The 5 amendments included 3 offered by the American Council of Life Insurers, Washington (see box).
Sevigny’s motion was made right after Julie McPeak, chair of the “A” Committee and executive director of the Kentucky office of insurance, said it was not her intent to have further discussions on the draft during the June summer NAIC meeting, but rather to have it before the NAIC’s executive committee and plenary. McPeak noted that the model has been in discussion for over a year and that 4-5 drafts of an amended model have been produced.
Many interested parties continued to call for further discussion following the vote.
“It was an extraordinary process that didn’t involve any debate,” said Doug Head, executive director of the Life Insurance Settlement Association, Orlando. “We will continue to object to the approach and continue to point out the problems in this model,” such as a 5-year ban on the sale of contracts with certain 2-year exceptions, he said.
Speaking of an upcoming interim meeting of the National Conference of Insurance Legislators, Troy, N.Y., Head noted that “the NCOIL meeting will be a full-face discussion, which is more than we got at the NAIC.” The NAIC model contains “all kinds of changes that are damaging to the secondary market,” Head added.
“They [regulators] hung their hat on the fact that they worked on this one year. But they completely disregarded substantive comments,” said Scott Cipinko, executive director of the Life Insurance Finance Association, Marietta, Ga. “We will oppose it in every state. It’s a bad model.”
One reason, he said, is that the sale of stranger-originated life insurance through trusts has not been addressed. “People who are doing STOLI are dancing in the streets right now. Insurers will have to do a lot more work [to catch STOLI transactions.]“
The best models adopted by the NAIC, Cipinko said, have been ones such as the Suitability and Sales Illustrations models, about which there was extensive dialogue.
Jack Kelly, a representative of a new group formed in late March, the Institutional Life Markets Association, Washington, said his group would have liked to see more “deliberative” discussions on issues such as the bank provisions adopted to satisfy concerns of the OCC.