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August 05, 2009 at 08:00 PM
New legal and regulatory restrictions are prompting many life settlement companies to pull out of one or more states.
An online survey of life settlement companies found that 43% have stopped doing business in one or more states.
Half of the companies that have stopped doing business in at least one state cited bonding requirements or other licensing provisions as the reason for pulling out, according to the Life Insurance Settlement Association, Orlando, Fla., which conducted the survey.
Settlement firms most often cited North Dakota, West Virginia and Vermont as states they have left due to concerns about laws and regulations.
All 3 states have restricted use of settlements during the first 5 years after a life insurance policy is purchased.
North Dakota and West Virginia both require life settlement providers to carry a surety bond, LISA notes.
Starting Oct. 1, Vermont will prohibit brokers from earning more than 2% of the amount paid by a life settlement company to the policy owner.
Asked about the biggest threats facing the industry, 47% of survey respondents cited a lack of capital; 16%, “unreliable mortality estimates,” 11%, “negative media reports,” 10%, “fraudulent activity by industry actors”; and 9%, a “negative state regulatory environment.”
