Life Settlements

Record Term

records of the disclosure must be kept by the licensed broker for at least 3 years after the service were performed.

Financing Transaction

takes place when a licensed settlement provider obtains funds from the financing entity.

Life Settlement Broker

is a person who, for compensation solicits, negotiates, or offers to negotiate a life settlement contract, they represent only the policy owners.

Insured Disclosure

the provider or broker must also disclose that the contract will be limited to once every 3 months if the insured's life expectancy is more than one year, and no more than once a month is less than one year to live.

Disclosure

brokers and providers must give the owner a separate document which clearly lists all the required disclosures.

Intermediary Registration Requirements

submit an application and required fees, list all the states where the intermediary does business, submit a detailed plan of operation, identify the life settlement intermediary executive officers, and submit a set of fingerprints.

Exceptions to the 2 Year Rule

owner or insured is terminally ill, owner or insured disposes of ownership interest in a closely held corporation, owner's spouse dies, owner divorces, owner retires, owner becomes physically or mentally disabled, owner becomes bankrupt or insolvent.

Accountability and Choice of Law

the regulations apply to any contract made or solicited with a resident of this state or any owner physically present in this state.

Life Producer

has maintained an active license for one year, the pre-licensing class and exam, as well as fingerprinting, may be waived when applying for a life settlement broker license.

Non-Life Settlements

1) assignment of a policy as collateral for a loan, 2) policy loan, 3) surrender of an insurance policy, 4) 1035 exchange, 5) assignment to an individual, 6) employer owned life insurance, 7) business insurnace

Two Year Prohibition

no person may enter into a life settlement contract within 2 years after the issuance of the policy.

Prohibited Practices

1) entering into a contract aware of deception, 2) entering into a contract aware of intent to avoid disclosure, 3) engaging in any fraudulent acts, 4) entering into a premium finance loan arrangement, 5) having an interest in the policy, 6) not being properly licensed, 7) not remitting any proceeds paid for transferring ownership, 8) paying a finder's fee to any owners physician, attorney, etc, 9) paying broker fees before they have been fully disclosed, 10) paying life settlement payments in installments.

Life Settlement Provider Duties

1) fully disclose the identity of all stockholders, partners and officers who have a controlling interest, 2) provide a detailed plan of operation, 3) provide a certificate of good standing, 4) provide an anti-fraud plan, and 5) demonstrate financial accountability. Life settlement provider's license expires on June 30 of odd-numbered years.

Life Insurance Applications

the insurer may include a notice stating that, should the policy be used as collateral in such an arrangement, a person unknown to the insured may own an interest in the insured's life.

Financial Entity

includes any accredited investor who provides funds for the purchase of one or more life settlement contracts and who has an agreement in writing to do so.

Nonconforming Contracts

any life settlement contract that does not conform to the provisions of the Insurance Code will be enforceable as if they did comply.

Life Settlement Provider

is a person who enters, or offers to enter, into a life settlement contract with the owner of the policy.

Qualified Institutional Buyer

is one that owns and invests at least 100 million in securities and is allowed by the SEC to trade in unregistered securities.

Privacy Rule for HIPAA

protected information includes all "individually identifiable health information" held or transmitted by a covered entity or its business associate, in any form of media. This is called protected health information.

Owners Disclosure

1) explanation of possible alternatives, 2) some or all of the proceeds of a life settlement may be taxable, 3) proceeds of a life settlement contract may be subject to claims from creditors, 4) receipts of the proceeds may adversely affect the eligibility for public assistance, 5) limit the insured's ability to purchase insurance, 6) proceeds will be sent in 3 days, 7) total amount paid by the life settlement contract, 8) date the funds will be available, 9) furnish a consumer information booklet, 10) life settlement provider's name, address, email, and phone.

Advertising

a licensed life settlement provider, intermediary, or broker may advertise, but must comply with all advertising and marketing laws, rules and regulations.

Broker License Requirements

at least 18 years old, submit an application to the Superintendent, be determined competent and trustworthy, complete required pre-licensing education, pass the licensing exam, pay the required fees and submit fingerprints.

Life Settlement Contract

establishes the terms under which the life settlement provider will pay compensation to the policy owner in return for the assignment, transfer, sale or release of any portion of the death benefit, policy ownership, beneficial interest or interest in a trust.

Stranger-Originated Life Insurance (STOLI)

is a life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies. Violate the principle of insurable interest.

Life Settlement Intermediary

is a person who maintains a system to sell or purchase a policy pursuant to a life settlement contract between the owner or broker and the life settlement provider.

Life Expectancy

is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors.

Firm or Association

is applying for a broker's license, they must name and authorize natural persons to act individually as life settlement brokers for the firm.

Business of Life Settlement

refers to any activity relating to the solicitation and sale of an insurance policy to a third party who has no insurable interest in the insured. The term owner refers to the owner of the policy who may seek to enter into a life settlement.

Life Settlement

refers to any financial transaction in which the owner of a life insurance policy sells a life insurance policy to a third party for some form of compensation, usually cash.

Fingerprinting Requirements

the Superintendent may require any individual named in the application for a broker's license to submit a set of fingerprints, unless the applicant is licensed as an insurance producer with a life line of authority.

Broker Disclosure of Offers

the broker must provide to the insured a complete and accurate description of all offers, counteroffers, acceptances, and rejections relating to the proposed life settlement contract.

Right of Rescission Disclosure

the life settlement provider or broker must disclose that the owner has the right to change their mind, and rescind the life settlement contract within 15 days after receipt of the proceeds. Within 5 days after receiving notice, the life settlement provider must provide a statement itemizing the following, amount of the proceeds, amount of premiums paid and loans plus interest paid. Within 15 days after that the owner must repay the stated items.

Compensation

refers to anything of value whether paid as commission or otherwise including money, credits, loans, interest on premiums, vacations, prizes or gifts.

Broker Commission Disclosure

the name each broker, intermediary, producer or consultant that will be compensated and the amount. no broker can receive a commission if they acted as a consultant with regard to the transaction within the last 12 months.

Penalties & Civil Remedies

violating the code in relation to life settlements may result in fines of up to $100,000 for each settled policy. The provider may be required up to $2,000/day for not filing a fraud detection and prevention plan.

Trust Owned Policies

it is also illegal to use a trust, directly or indirectly, to provide funds for a STOLI transaction in a manner that violates insurable interest laws in NYS

Privacy

life settlement brokers, intermediaries, or providers may not share information regarding the insured's identity, or financial or medical information, except as necessary to conduct the business of the transaction.

Commission Sharing

persons are prohibited from receiving any compensation for acting as a life settlement broker, or sharing compensation with an unlicensed person.