Life Insurance Settlement Association President David Hartman says stranger-originated life insurance arrangements are no longer plaguing his industry.

“STOLI is dead,” Hartman said here at LISA’s annual fall meeting. “It’s gone. It doesn’t exist any more.”

STOLI involves consumers who buy life insurance, possibly with cash from investors, solely to sell the policies on the secondary market as quickly as possible.

Critics say the arrangements violate state insurable interest laws.

The idealistic reason for STOLI’s demise is simply that “it’s illegal, and it’s wrong;” Hartman said.

The practical reason is that “nobody can make any money on it,” Hartman said.

Life insurers and regulators have become increasingly aware of questionable transactions and are willing to fight them, he said, thus creating a risk that a STOLI transaction may not pan out for the backers.

“None of the investors are willing to take a risk of getting a goose-egg,” Hartman said.

Not everyone at the meeting agreed with Hartman’s assessment.

Darwin Bayston of Life Settlement Consulting and Management L.L.C., Kennesaw, Ga., said he is “not sure we should be having the funeral for STOLI yet.”

But Hartman said he wanted to make the point that STOLI is, at this point, more of a perception problem than an actual issue.

LISA and its members will step up their advocacy activities to address any similar problems in the future, Hartman said.

Among those he saw as being attached to the life settlement market, he said, are so-called “synthetic life settlements” in which funds are invested based on mortality risk of individuals or pools of individuals without actual insurance policies changing hands.

“A synthetic is not a life settlement,” Hartman said. “It’s a derivative, but we’re going to get blamed for it if something blows up down the road.”

Another major topic of conversation at the meeting was the level of legislative activity expected in 2009.

In the past 10 months, 30 states have considered life settlements legislation and 11 have enacted new laws.

LISA officials promised to work in cooperation with regulators and legislators in each state to ensure that state officials pass laws regulating life settlements but do not infringe upon the sellers and buyers in the secondary market.

The keynote speaker at the conference, Burson-Marsteller President Mark Penn, who may be best know for his recent role in the presidential campaign of Sen. Hillary Clinton, D-N.Y., advised LISA members to fight negative impressions of the industry publicly.

“The best strategy is to tell your story and get the facts out there, even though it is difficult to do that in this economy of fear,” Penn said.