The New York State Insurance Department is about to release a draft of a proposed life settlement bill.
Officials have been working on the bill for 9 months, and they already have brought outside stakeholders in to go over the bill line by line, according to New York First Deputy Superintendent Kermitt Brooks.
The bill covers topics such as privacy and also make rooms for changes such as an increase in use of securitizations, Brooks says.
The New York department is “agnostic about whether a life settlement market develops,” but it is intent on insuring “good protections for consumers,” Brooks says.
The result draft is different from the models developed by the National Association of Insurance Commissioners, Kansas City, Mo., and the National Conference of Insurance Legislators, Troy, N.Y., Brooks says.
The New York department plans to unveil the bill in about a week, once it finds a sponsor.
One key provision would restrict life insurance policy sales within 2 years after purchase. Some proposals call for limiting sales for 5 years.
The New York department chose a 2-year ban in an effort to balance policyholder rights against competitive interests, the need to protect insurable interests and a settler’s privacy, Brooks says.
Other proposed provisions include requirements that:
- Life insurers let agents discuss policyholders’ life settlement options.
- Parties disclose all settlement offers and compensation, along with disclosure of all persons who receive compensation from providers or brokers.
- Insureds receive warnings about the possible tax consequences of selling policies and about the fact that the settlement proceeds might be open to creditors’ claims.
- Life settlement buyers and brokers be licensed.
- Life settlement intermediaries, life settlement bulletin board systems, and both foreign and domestic settled policy investors register with the state.
Investors who buy securities backed by a pool of settled contracts would not have to register, because they would have no access to policyholders’ personal information, Brooks says.
The bill does not include a definition of stranger-owned life insurance.
Instead of going after STOLI, “we want to get at the activity that is driving STOLI,” Brooks says.
To discourage STOLI, “entities providing premium financing either directly or indirectly are limited to receiving only the amounts required to pay the principal, interest and service charges related to policy premiums paid under the premium finance agreement,” Brooks says.
The bill does define “trust,” Brooks says.