The Life Insurance and Annuities Committee at the National Association of Insurance Commissioners (NAIC) has adopted a stranger-originated annuity (STOA) transactions model bulletin draft.

The committee approved the draft earlier this week in Austin, Texas, during a session at the NAIC’s spring meeting.

A STOA transaction is a move by investors or others to get individuals with short life expectancies to buy annuities that provide guaranteed minimum death benefits. A STOA arranger pays the ailing individual a small sum, then seeks to collect the death benefit when the individual dies.

“In order to find individuals who meet the aforementioned criteria, these producers and/or investors have been known to take out advertisements in papers as well as solicit individuals residing in nursing homes or hospice,” officials say in the STOA bulletin draft.

The American Council of Life Insurers, Washington, praised the bulletin when the NAIC, Kansas City, Mo., exposed it to the public in late 2010.

The National Association of Financial Advisors, Falls Church, Va., praised the draft but asked for several changes to emphasize that most agents do not participate in STOA transactions. The NAIC added those changes to the bulletin.

The Life Insurance Settlement Association, Orlando, Fla., has opposed STOA but suggested that life insurers use the practice to smear the companies and individuals in ordinary, beneficial life settlement transactions.

Other stranger-originated annuity coverage from National Underwriter Life & Health: