State lawmakers gathered in Chicago Thursday to fine-tune the language of a proposed life settlements model act.
Members of the National Conference of Insurance Legislators, Troy, N.Y., hope to adopt the model in November, at NCOIL’s annual meeting.
Participants in the Chicago work session included about 40 lawmakers, regulators, life insurance and life settlement company executives, according to Mike Humphreys, NCOIL director of state-federal relations.
Representatives from the North American Securities Administrators Association, Washington, offered a number of suggestions about model details.
After reviewing NASAA suggestions, NCOIL members deleted references in the NCOIL draft to terms such as “life settlement purchase agreement” and “life settlement investment agent.”
NCOIL members also deleted all of Section 14 of the draft, which dealt with false representations and deceptive words, Humphreys says.
NCOIL members deleted the section because they now believe the provisions “relate solely to the regulation of the securities side of life settlement transactions,” Humphreys says.
The work session participants also rejected some NASAA suggestions.
NASAA had recommended that NCOIL delete references in the life settlements model to financing entities, financing transactions and special purpose entities.
NCOIL kept the reference because the terms are used almost exclusively as carve-outs from certain restrictions, and because there is general agreement among interested parties that “the references needed to remain in the model act,” Humphreys says.
“These references are a part of current settlements regulation across the nation,” Humphreys says.
NCOIL members approved a package of amendments proposed by Rep. Robert Damron, D-Nicholasville, Ky. and Rep. George Keiser, R-Bismarck-N.D.
Keiser is chair of the NCOIL subcommittee in charge of revising the NCOIL life settlements model.
The Damron/Keiser proposal would strengthen the penalties section of the model, create a definition of “fraudulent life settlement act,” and address the role of trusts in efforts to create “stranger-owned life insurance,” or efforts by investors to finance the purchase of new life insurance policies mainly to create policies that can be used in future life settlement arrangements.
Interested parties will have until Nov. 2 to submit comments on the Damron/Keiser proposal.
In some cases, life companies may have been willing participants in transactions that have resulted in STOLI, Damron says.
Carriers can avoid doing business with STOLI trusts by asking for all trust documents and asking more questions before issuing policies, Damron says.
The American Council of Life Insurers, Washington, still has concerns about the NCOIL model.
There is still “a long way to go” if NCOIL wants to pass a model at its annual meeting, says John Gerni, regional vice president of state relations at the ACLI.
The ACLI has “substantial issues” with model provisions dealing with STOLI, data transparency, and penalties, Gerni says.
The use of trusts in STOLI is a pending issue because insurers want to see how New York regulators will handle trusts in a life settlements draft they are developing, Gerni says.