AALU VP Discusses Life Settlement Model Provisions

There are also a number of hardship exceptions that allow sales in the secondary market for special circumstances, Korb said.

In addition to features that are already part of the proposed model, Korb said, the AALU continues to seek in a provision that would clarify and narrow restriction on “evaluation for settlement” so that it applies to STOLI, but not to legitimate practices. This is based on feedback from a number of AALU members who engage in legitimate practices that could inappropriately be pulled in by the current wording of the proposed, Korb said.

Korb predicted that the NAIC plenary, or body that consists of all voting NAIC members, probably will vote to adopt the model revision.

The full NAIC “almost always approves” model acts once they have been approved by a committee, as the updated model act for life settlements was, Korb said.

Also during the panel discussion, Doug Head, executive director of the Life Insurance Settlements Association, Orlando, Fla., said it does not seem as if STOLI must be subject to a great deal of exacting regulation, because insurers themselves have told investors that they have been successful at rooting out abusive STOLI arrangements.

But William Fisher, associate general counsel at Massachusetts Mutual Life Insurance Company, Springfield, Mass., called for aggressive enforcement of STOLI arrangements.

“I don’t think you can leave this type of enforcement to the market,” Fisher said.

The idea that insurers should be solely responsible for rooting out potential STOLI is similar to “saying you should not pass a law against shoplifting” because grocery stores should be able to stop thieves themselves,” Fisher said.