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April 29, 2007 at 04:00 PM
Stakeholders debating the update to the National Conference of Insurance Legislators’ model act regarding life settlements opted to hold off on much of the major decision making until the group’s summer meeting in July.
At an interim meeting of the NCOIL Life Settlements Subcommittee held April 21 just outside Washington, D.C., members of the panel agreed with representatives of the life settlements industry, the premium finance industry and life insurers that more work should be done to try to broach the gap on the major issues addressed by the model act prior to the committee taking action.
One of the areas that will be discussed between the stakeholders is the basic issue of how the model act will define a life settlement contract and differentiate it from stranger-originated life insurance, or STOLI. Life insurers, represented by Michael Lovendusky, vice president and associate general counsel for the American Council of Life Insurers, Washington, proposed an “indirect approach” on the issue that would offer a broad prohibition and exemptions within the prohibition that allow for what the ACLI views as legitimate life settlements transactions.
Lovendusky said the standard method of seeking to identify and prohibit STOLI transactions as they are exposed simply caused the bad actors in the industry to develop new methods. The ACLI is seeking to “build a better mousetrap” with its proposal, he explained.
Doug Head, executive director of the Life Insurance Settlements Association, Orlando, Fla., balked at the proposal, arguing that “the indirect approach, as it has been described, is filled with potential mischief” that could interfere with transactions and affect the rights of consumers to sell their policies.
