California Gov. Arnold Schwarzenegger, R, has vetoed a life settlement bill.

The bill, S.B. 1543, would update the California life settlement laws by changing the laws to refer to “life settlements,” rather than to “viatical settlements,” and by stating that some types of trust-owned life insurance arrangements violate state insurable interest laws.

The bill also would require life and disability agents to keep their agent licenses in good standing to retain the right to handle life settlement business, and it would impose a number of other requirements, such as life settlement license requirements for individuals who arrange life settlements.

S.B. 1543 was amended “very late” in the legislative session, Schwarzenegger writes in a letter to the Senate.

“While many of the provisions were agreed to by all the parties involved, some of the provisions are still subject to worthwhile debate,” Schwarzenegger writes.

“It is my desire to ensure that life settlement transactions contain proper notification and disclosure to consumers,” Schwarzenegger writes. “I am also concerned that the final version of the bill may unfairly exclude some companies from participating in the legitimate life settlement market.”

Schwarzenegger writes that his staff will conduct meetings with all stakeholders and that he believes legislation can be passed quickly in 2009.

The Life Insurance Settlement Association, Orlando, Fla., says it would have liked to see the bill, which was based on a model developed by the National Conference of Insurance Legislators, Troy, N.Y., signed into law.

“LISA believes that Senate Bill 1543 was outstanding legislation that protected the property rights of California,” LISA Executive Director Doug Head says in a statement.

LISA notes that the bill was passed by nearly unanimous consent of the California Assembly and Senate, and that it had the support of several consumer groups as well as of trade groups.