The American Council of Life Insurers (ACLI), which represents nearly 300 life insurance companies, stirred up a hornet’s nest recently with its Feb. 3 policy statement asking legislators to ban the practice of securitizing blocks of life settlements.
ACLI’s statement asserted that packaging life insurance settlements into securities increases the risk of fraud, by encouraging securitizers to lure seniors into participating in illegal, stranger-originated life insurance transactions; by encouraging seniors to help file fraudulent STOLI applications; and by encouraging investors to buy life settlement-backed securities without understanding the risks involved.
ACLI further asserted that uncertainty about life expectancy makes rating life settlements difficult, and therefore they cannot be properly underwritten and are likely to fail economically. (Click here to read ACLI’s complete policy statement).
Critical reaction from industry organizations with a stake in life settlements was swift.
On Feb. 4, Washington-based Institutional Life Markets Association released a response to ACLI’s statement. “Once again, ACLI has chosen to mix apples and oranges when condemning the life settlement market. The recent policy statement issued by ACLI concerning securitization of life settlements is misplaced and incorrect,” said ILMA Director of Government Affairs Jack Kelly.
(To read ILMA’s complete statement, click here)