To The Editor:

Steve Piontek accuses the American Council of Life Insurers (“Dirty Little Secrets,” Feb. 15, 2010) of making unfounded allegations against the life settlement industry in our policy statement opposing securitization of life settlements.

He cites “scuttlebutt” that certain companies knowingly accepted STOLI-related applications. Not a single company is named, nor a shred of documentation presented, nor a source identified. “Scuttlebutt,” and certainly unsubstantiated “scuttlebutt,” shouldn’t be grist for repetition in a quality publication.

ACLI has aggressively and honorably battled against stranger-originated life insurance, a thoroughly disreputable practice that undermines insurance markets and exposes seniors to significant legal issues. And we’ve been highly successful. Some 28 states have enacted effective anti-STOLI laws in the past three years.

In these efforts, we have been diligent in distinguishing STOLI from life settlements, in stark contrast to our opponents. The legislation we support would not affect policyholders who purchase life insurance in good faith to protect their families, loved ones or businesses.

One final point, underwriting a life insurance policy is not as simplistic a process as Mr. Piontek seems to believe, especially when STOLI promoters use trusts and other devices to mask the true nature of the transaction. While we cannot comment on specific company underwriting procedures, it is fair to say that as life insurers become more aware of the methods used by STOLI promoters, they develop better techniques to identify suspicious transactions. But it is a constant battle, and STOLI promoters regularly employ new methods to escape detection. Insurers need better tools to identify and stop STOLI, which is the point of the legislation we support.

Bruce Ferguson

Senior Vice President, State Relations

American Council of Life Insurers

Washington, D.C.