A top American Council of Life Insurers staff official today told members of the life settlement industry that a large “credibility gap” must be bridged if the two industries are to work together.
Michael Lovendusky, ACLI vice president and associate general counsel, said the credibility gap between the two industries is particularly broad on the issue of stranger-owned-life-insurance, or STOLI.
Lovendusky made his comments at the eighth annual Life Settlement and Longevity Conference, sponsored by Fasano Associates, held in Washington, D.C.
While making his comments, Lovendusky conceded under questioning that the life insurance industry must do a better job of underwriting in order to detect STOLI.
In presenting Lovendusky, Michael Fasano, president of Fasano and Associates, said that the life insurance and life settlement industries “should be on the same side of the table.”
“From my perspective, life insurance companies are among the most logical investors in life settlements,” Fasano said.
He said the investment makes sense in terms of hedging an insurance company’s other assets, “it makes sense in terms of the expertise the [life settlement professional] has on the actuarial and medical side and the added value they can bring to the process.”
Fasano added that he considered life settlements to be an enhanced settlement option that makes the life insurance contract a much more valuable proposition.
In responding to questions from the audience after his opening statement, Lovendusky said it is wrong for people in the life settlement industry to say that life insurers encourage STOLI.
Lovendusky noted that at its annual meeting last week in Orlando, insurance company officials said at a breakout session that insurers over the last few years have been trying to upgrade their screening practices for STOLI.
He also said that it is becoming more difficult for insurers to detect STOLI because in many cases, the vehicle for a STOLI is a trust.
He said that a trust document was formerly 20 pages, but that these are now sometimes 150 pages, and that in some cases the documents do not reflect that a subsidiary trust effectively represents a STOLI.
“It is difficult to interpret the complexity of applications,” Lovendusky acknowledged.