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September 04, 2008 at 11:58 AM
Florida insurance regulators may act against stranger-originated life insurance during their state’s 2009 legislative session.
Florida’s legislative session runs from March through May.
The Florida Office of Insurance Regulation held an informational hearing on STOLI Aug. 25 to learn more about the issue, according to Mary Beth Senkiewicz, a deputy commissioner with the Florida office.
The Florida office will be accepting written comments about the topic through Sept. 28.
Most participants in the Aug. 25 meeting seemed to agree that STOLI is an illegal attempt to evade an insurable interest law, Senkiewicz says.
Participants also seemed to agree that legitimate contracts are assets and that an owner can turn around and sell a contract, she says.
Participants distinguished “stranger-owned” from “stranger-originated” contracts, emphasizing concerns about the use of premium financing to manufacture a policy solely so that the policy can be sold to investors, Senkiewicz adds.
Other points that came up during the hearing included the potential impact of STOLI on the price and availability of insurance and the waivers of liability that seniors are often expected to sign that could make them liable for losses incurred by investors.
Senkiewicz says Florida Insurance Commissioner Kevin McCarty also wants to examine how trusts are used in STOLI transactions and how models developed by the National Association of Insurance Commissioners, Kansas City, Mo., and the National Conference of Insurance Legislators, Troy, N.Y., could be used in the development of any legislation.
Industry group representatives have expressed varied reactions to the hearing:
- Curt Leonard, a regional vice president at the American Council of Life Insurers, Washington — “The manufacture of life policies for the benefit of investors is a real threat to our franchise,” Leonard says.
During the Florida STOLI hearing, there was a discussion about the meaning of a variety of acronyms, he says.
Insurers do not have a problem with stranger-owned life insurance, but they do have concerns about stranger-originated life insurance, where “investors are looking for elderly bodies to recruit,” Leonard says.
