The Life Insurance Settlement Association (LISA) says its members agree with state securities regulators about the need to root out fraudulent life settlement securitization programs.
LISA, Orlando, Fla. – a group that represents the players in the life settlement community – talks about the issue in a response to an annual list of “financial products and practices that threaten to trap unwary investors” published recently by the North American Securities Administrators Association (NASAA), Washington. The list includes an entry for “Securitized Life Settlement Contracts.”
“Legitimate investments in life settlement contracts involve a high degree of risk, and investors may be responsible for routinely paying costly premiums for policies that insure people who outlive their life expectancies,” NASAA officials say.
Some managers of securitized life settlement programs issue settlement-backed bonds that are supposed to pay a minimum rate of return even if the consumers who sold the life insurance policies outlive their life expectancies.
“This risk-reducing structure has too often proven fraudulent and left victims with nothing but worthless paper issued by a bonding company that does not maintain sufficient assets to fulfill the guarantee, operates in an unregulated overseas territory or simply does not exist,” NASAA officials say.
LISA says it is reaffirming long-standing support for state securities regulators’ efforts to fight schemes that target individual investors.
LISA Executive Director Darwin Bayston notes that the typical investors in life settlement portfolios are sophisticated entities such as banks, insurance companies, pension funds and hedge funds.
“LISA strongly supports increased educational efforts by state and federal securities regulators as well as stronger enforcement actions against fraudulent activities,” the group says.
Bayston notes that securities regulators in Georgia and Pennsylvania already have issued news releases warning residents of their states against scams involving life settlements.