ANOTHER SIGNIFICANT MONTH ON THE REGULATORY FRONT
It seems like every month that word of new legislation, new regulations, or new case law gives rise to changes across the industry. March 2008 was no exception, as several important events occurred which mark the changing regulatory environment in the life settlement arena. On March 25, 2008, like many other U.S. states, the State of Kansas Senate Financial Institutions and Insurance Committee approved revised life settlement legislation based on the most recent version of the National Conference of Insurance Legislators (NCOIL) Life Settlements Model Act, aimed at eliminating stranger-originated life insurance (STOLI) and including a provision requiring, generally, that a life insurance policy be owned at least two years before it can be the subject of a settlement transaction. The bill is expected to be considered by both chambers of the Kansas state legislature.

Elsewhere, to turn now to a state which previously did not legislatively address viatical settlements or life settlements, new legislation set to soon go into effect in West Virginia was offered to improve life settlement regulation there and to stop stranger-originated life insurance. However unlike the Kansas legislation described above, West Virginia Senate Bill 704 is based on the most recent version of the National Association of Insurance Commissioners (NAIC) Viatical Settlements Model Act, a model which has served as the model for legislation in only one other state so far and which the life settlement industry generally questions the merits of following. The West Virginia legislation has been criticized by life settlement industry participants as being hastily conceived & introduced and greatly limiting consumers' rights when it comes to what consumers can do with their life insurance policies. That legislation, in part, requires that a life insurance policy generally be at least five years old before it can be the subject of a settlement transaction , includes onerous licensure requirements for providers, and imposes unnecessarily harsh penalties for West Virginia residents, consumers and property owners who violate certain of its provisions. If you conduct business in West Virginia or with West Virginia-resident policyowners, you would probably be well served to carefully review that legislation and any regulations which follow.

Related to West Virginia Senate Bill 704 is recent word that the American Council of Life Insurers (ACLI), the Association for Advanced Life Underwriting (AALU), and the National Association of Insurance and Financial Advisors (NAIFA) support legislation across the country that is based on the most current version of the NAIC Viatical Settlements Model Act. While much of that support stems from a desire to curtail STOLI practices and to protect consumers from fraud, such legislation, whether intended or not to do so, severely restricts or even eliminates the life settlement option being available to many policyowners who purchased life insurance for the sake of insurance (that is, not with a view towards selling that life insurance policy) and whose need or benefit from a life settlement could be greatest.

At The Lifeline, we believe it is crucial for all members of these associations to fully understand what is going on so that they can properly evaluate whether or not their current interests are being served. We encourage everyone in the industry to join the conversation and get up to speed.

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