The Institutional Life Markets Association and the National Association of Insurance and Financial Advisors have welcomed congressional efforts to study the life settlements market.
The Senate Special Committee on Aging held a hearing Wednesday to address allegations of possible abuses in the life settlements market.
NAIFA, Falls Church, Va., submitted a written statement emphasizing its support for the Aging Committee's efforts and its concerns about stranger-originated life insurance.
"NAIFA does not oppose all life settlements," NAIFA says in its statement. "Under the appropriate circumstances a life settlement may provide the policy holder with the means to access the maximum value from their policy if they determine that they no longer need the insurance coverage."
But NAIFA does support rigorous regulation and oversight of life settlements and settlement transactions, and it also supports the Viatical Settlements Model Act developed by the National Association of Insurance Commissioners, Kansas City, Mo., NAIFA says.
NAIFA also "strongly opposes all types of STOLI transactions, and has been at the forefront of efforts to restrict and prohibit STOLI since we first became aware of these transactions in early 2006," the group says. "NAIFA believes that STOLI violates the essential social purpose of life insurance, which is to provide protection."
Another worry is that older consumers who participate in STOLI "may use up their insurability and be unable to purchase needed life insurance in the future," NAIFA says.
States are acting against STOLI, and NAIFA is supporting those efforts, NAIFA says.
Another group, ILMA, Washington, which represents large institutional investors, such as units of Goldman Sachs Group Inc., New York, and UBS A.G., Zurich, also praised the Aging Committee's efforts.
The hearing "is a welcome opportunity for the public to learn about this little-known, but valuable option for selling unwanted, unneeded or unaffordable life insurance policies," Jack Kelly, ILMA's government affairs director, says in a statement.
But regulators must ensure that consumers are protected, that they fully understand the ramifications of the decision to sell a life insurance policy, and that they have as many options as possible with respect to the assets they own, ILMA says.
"ILMA has at all times continued to advance the need for a sound, common sense approach to the life settlement industry as it is currently fragmented and lacking in uniform documentation and standards," the group says. "Transaction details are often opaque, confusing or not disclosed."
ILMA notes that it has developed a Life Settlement Transaction Disclosure Statement, which provides the face value of a policy, its estimated cash surrender value, the gross price being paid for the policy, the amount of the broker's compensation and the net proceeds to the seller.
ILMA members want federal and state securities regulators to continue enforcing existing laws requiring proper regulation and disclosure in the sale of securitized pools or fractionalized interests in life settlements, the group says.
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