Life Settlements
Trust-owned policies
Also illegal to use a trust, directly or indirectly, to provide funds for a STOLI transaction in a manner that violates insurable interest laws of this state
Insured Disclosures
Life settlement broker or provider must disclose to the insured that the insured may be contacted by the provider, the broker, or another authorized representative for information regarding the insured's health status or for address verification. Provider 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 if the insured is expected to live one year or less
Two Year Prohibition
No person may enter into a life settlement contract within 2 years after issuance of the policy
Intermediary Registration Requirements
Once the registration has been approved, it remains in force for 24 months, expiring on June 30th of odd-numbered years
The Superintendent of Insurance
The Superintendent must approve all life settlement contract forms as well as the final contract
Financing Entity
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
Qualified Institutional Buyer
one that owns and invests at least $100 million in securities and is allowed by the SEC to trade in unregistered securities.
Broker License Requirements
- At least 18 years old - Submit an application to the Superintendent on the approved form - Be determined competent and trustworthy by the Superintendent - Complete required pre licensing education - Pass the licensing exam - Pay any required fees - Submit fingerprints
Business of Life Settlement
Any activity relating to the solicitation and sale of an insurance policy to a third party who has no insurable interest in the insured
General Rules
Two Year Prohibition
Life Settlement Contract
establishes the terms under which the life settlement provider will pay compensation to the policyowner, in return for the assignment, transfer, sale, or release of any portion of any of the follwing: death benefit, policy ownership, beneficial interest, interest in a trust or any other entity that owns the policy
Life Settlements
Financial transactions that allow the policy owner to sell a life insurance policy to a third party for some form of compensation
Stranger-originated life insurance
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. The State of NY does not allow direct or indirect participation in STOLIs
Right of Rescission Disclosure
Life settlement broker must disclose that the owner has the right to change his or her mind. The owner may rescind a life settlement contract within 15 days after the receipt of the life settlement proceeds
Life Settlement Intermediary
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.
Owners Disclosures
To help the owner understand the benefits and consequences of a life settlement transaction, the following info should be in the disclosure: - Explanation of possible alternatives, including accelerated benefits offered by the insurer - That some or all of the proceeds of a life settlement contract may be taxable - The proceeds of a life settlement contract may be subject to the claims of creditors - Receipt of the proceeds may adversely affect the recipient's elgibility for public assistance - That participation in a life settlement arrangement may limit the insured's ability to purchase life insurance on his or her life in the future - That the proceeds will be sent to the owner within 3 business days after the life settlement provider has received acknowledgement that ownership of the policy has been transferred and the beneficiary has been designated according to the terms of the life settlement
