From Life and Health National Underwriter:

The New York State Insurance Department is asking for comments on proposed life settlement sector licensing and registration requirements.
The proposed rules would require a life settlement provider to pay a $20,000 license fee, and it would require a life settlement intermediary operating in the state to pay a $10,000 registration fee.

The rules would set an annual license fee of $40 for life settlement brokers.

Providers would be subject to $5,000 in license renewal fees every 2 years; intermediaries would pay a $2,500 renewal fee every 2 years.

In addition to paying the licensing fee and the renewal fees, a settlement provider would have to post a $250,000 surety bond.

The New York department plans to define a “life settlement intermediary” as a person who maintains a system for collecting offers to sell or buy life insurance policies to brokers or providers.

In an open letter to the Journal Times, Doug Head, Executive Director of LISA, addressed the proposed legislation in Wisconsin – State Bill 513.  He describes the legislation as misguided and swayed by “insurance lobbyists”.  The bill proposes to limit the option of life settlement in Wisconsin.

“SB 513 makes no requirements of insurers to clean up their own practices, while thwarting the existing rights of consumers”

Last week the ACLI called for “policymakers to ban the practice of securitizing blocks of life settlements”.  This generated a fire-storm of responses from industry players, which came as little surprise.  The press release, which seemed hastily assembled and supported with outdated data, claims that securitizing settled policies will further encourage STOLI.  However, legitimate industry players scoffed at these unfounded claims:

“ACLI in the past has repeatedly acknowledged the validity of life settlements, and in its recent statement fails to distinguish between valid life settlements and the illegal origination of life insurance policies [STOLI],” said Jack Kelly, director of government affairs, ILMA

Many believe that the ACLI, after failing to find congressional support in banning life settlements, are looking to ban the securitization of policies instead. The banning of securitizing policies could further dry-up liquidity, limiting purchases of legitimately settled policies.  Legitimately settled policies play an integral role to policyholders.  More specifically, it provides policyholders an option, rather than allowing their policy to lapse or surrounding their policy, for pennies on the dollar.

The ACLI is making a bold attempt to confuse policyholders, and the general public, by blurring the lines of life settlement and STOLI.  Further, this reinforces the perceived “predatory nature” of the life settlement industry among policyholders.  The irony of this – which we have discussed repeatedly – is that life settlement does the exact opposite of preying on seniors, it empowers them.

To read more responses to the ACLI press release, follow the links:

National Underwriter

ILMA & LISA

Insurance Studies Institute

The Obama administration’s proposed 2011 budget has outlined new taxes that may influence the Life Insurance Secondary Market – positively and negatively. Taxing COLI, for example, might encourage corporations to liquidate some policies. And, taxing the sale of a life insurance policy could add a deterrent to selling a policy – adversely affecting life settlement transactions. (See Below)

The proposal would require a person or entity who purchases an interest in an existing life insurance contract with a death benefit equal to or exceeding $500,000 to report the purchase price, the buyer’s and seller’s taxpayer identification numbers (TINs), and the issuer and policy number to the IRS, to the insurance company that issued the policy, and to the seller.

You can review the budget proposal HERE. Details on the Life Settlement proposal can be found on page 69.