The Life Settlements Wire

Iowa Gov. Chet Culver signed legislation on May 10 that imposes a five-year waiting period before seniors can sell new life insurance policies on the secondary market.

SF 2392 is based on the model act developed by the National Association of Insurance Commissioners (NAIC). It attempts to prevent stranger-originated life insurance (STOLI) by curtailing sales of policies in which non-recourse financing is used.

"This bill provides disclosure and transparency to help consumers when they decide they want to institute a life settlement," the governor's office said in a written statement.

Doug Head, executive director of the Life Insurance Settlement Association (LISA), sent a letter to Culver on April 21 urging him to veto the legislation. Both houses of the Iowa Legislature passed the bill unanimously in April.

Head called the legislation "bad public policy and bad law" and said the state could face lawsuits challenging its validity. His nine-page letter outlined judicial decisions backing his assertion such as the Supreme Court ruling in Grigsby v. Russell as well as separate Iowa court cases.

Legislatures in Oklahoma and Connecticut passed life settlements legislation based on a model act that calls for maintaining the customary two-year waiting period before new policies can be sold.

The legislatures adopted laws based on a model act developed by the National Conference of Insurance Legislators (NCOIL). In addition to allowing policies to be settled after two years, the model act also defines stranger-originated life insurance (STOLI), which is considered an abuse in the marketplace. Under such schemes, investors entice insureds to take out policies in which investors lack insurable interest.

Representatives of trade groups for the life insurance and left settlements industries said they were pleased the states passed the legislation.

The Connecticut Senate adopted HB 5512 on May 7, following the House's approval on May 2.

The Connecticut legislation also bars carriers from preventing producers or brokers from telling clients about life settlements.

Oklahoma's legislation, SB 1980, passed in the Senate on May 8, which followed House passage of the bill on April 23.

Doug Head, executive director of the Life Insurance Settlement Association (LISA), said that six states have passed legislation based on the NCOIL model while three states have adopted legislation based on a competing model developed by the National Association of Insurance Commissioners (NAIC). That proposal prohibits sale of policies for five years after issuance. LISA opposes the NAIC model.

"We're pleased at the increasing signs of the understanding of the propriety of our approach, which has always been to define and prohibit and punish improper behavior," Head said.

The American Council of Life Insurers (ACLI), which represents carriers, issued statements complimenting the legislatures for passing the legislation, although the group has preferred legislation based on the NAIC model.

"There are a variety of ways to skin a cat," ACLI spokesman Jack Dolan said in an email. "The NAIC model, with its limited five-year moratorium on settlements, certainly is an effective legislative response to STOLI. But NCOIL is a good approach too."  

Sharmaine Miller is the new vice president of MLF LexServ, which processes policies for LEXNET, an online life settlement exchange run by Cantor LifeMarkets.

LexServ of Bethesda, Md., announced her appointment on May 9.

Miller will manage support operations for the exchange. She has more than 20 years of experience in the insurance industry, previously holding executive positions at Allstate Insurance Co. in Northbrook, Ill.

Rumson Capital, a life settlement broker in Jenkintown, Pa., named Robert Meyer as its new president. Meyer was previously vice president and has been with Rumson since its start-up four years ago.

Rumson also named Todd Shelbaugh as its new executive vice president. Shelbaugh was previously a vice president with National Wealth Advisors in Naples, Fla.

Rumson said it promoted two other managers. David Wright, a national sales manager since December 2006, was named vice president of marketing. Robert Daly will assume the role of director of life settlements. He has also been with the company since its inception, previously serving as senior account executive.

Premiere Professional Solutions, a Boca Raton, Fla., recruiting company, said May 8 that it expanded its services to offer temporary staff for the life settlement and premium finance industries.

The year-old firm had already offered permanent staffing for the life settlement and premium finance industries.

Shannon Parkoff, president of the company, previously worked at Peachtree Life Settlement Funding in Florida. Premiere said it recruits staff for most of the large life settlement and premium finance companies in the country.

Life settlements provider Maple Life Financial named Mark Todd its new business development director.

Todd joined the Bethesda, Md., provider on March 17. The company announced it had filled the position on May 7.

Todd, who lives in Mill Valley, Calif., was previously managing director for Life Policies of America, a small provider in Berkeley, Calif.

Maple Life said Todd has been able to develop relationships with leading financial institutions during his career.

"This addition reflects Maple Life Financial's commitment to meeting the growing needs of institutional investors across the globe," chief executive Nate Evans said in a statement. Many institutional investors "are turning to the secondary life insurance market as a new asset class because of its non-correlated nature," he said. 

Baring Asset Management has expanded its use of alternative assets by adding life settlement investments to its funds, FT Adviser reported.

The $96 million EEA Life Settlements fund, run by Guernsey-based EEA Fund Management and outsourced to U.S.-based ViaSource Funding Group, has been added to Baring's portfolios, the magazine reported on May 5.

"ViaSource is looking to generate 100 basis points a month, and the fund has been fairly positive since launch," said James Calder, head of Baring's multi-manger team, according to FT Advisor. "It uses policies with less than eight years to run, with a highly diligent process."

IFG Insurance, an insurance agency specializing in life settlements, said it formed a partnership with National Financial Partners, a large financial advisory firm.

IFG of Sarasota, Fla., said it will gain access to a worldwide network of more than 50 funders with the new partnership. 

National Financial said it has completed more than 24,000 life settlements. The company also sells whole, term, and universal life insurance and handles life insurance premium financing transactions.

Advanced Underwriting Solutions of Aurora, Colo., said on May 6 that it has been named the preferred life expectancy medical underwriter for the BlueCrest Life Settlements I Fund.

The fund's manager is BlueCrest Capital Management, an alternative asset manager in London that manages about $14 billion in diversified assets, Advanced Underwriting said in a statement.

Ohio state Sen. Steve Stivers told about 25 representatives of the life insurance and life settlements industries to reach a compromise on life settlement legislation or risk that neither group may like what legislators come up with.

The gathering in Columbus, Ohio, occurred on May 6, according to Shawn Busken, legislative aide for the senator. Stivers is chairman of the state Senate's Insurance, Commerce and Labor Committee.

"He put them together and said, 'It's in your best interest to negotiate this. Otherwise you'll be stuck with the decisions of the committee and the will of the committee, and it might not be in your favor,'" Busken said.

The two groups spent an hour-and-a-half negotiating after Stivers met with them, Busken said. Negotiations are due to continue again on May 7. The Senate committee is scheduled to hold a hearing that day on the merits of a  two-year waiting period before new life insurance policies could be sold, compared with a five-year waiting period.

The Ohio House passed a bill on Jan. 30 calling for the five-year waiting period. The provision is detested by many in the life settlements industry because they believe it will cut into their business. Life insurance industry representatives favor the five-year holding period as a way of stopping stranger-originated life insurance, in which policies are taken out primarily to benefit investors who lack insurable interest in the insured.

Ohio Insurance Department officials have asked providers who do business in the state to tell them how many life settlements they've sold in Ohio and nationally for the last four years – all on short notice.

The demand for the information was made on April 30 and was required to be submitted by May 2. The deadline was later extended to May 5 after some of the 17 providers in the state asked for more time, according to Doug Head, executive director of the Life Insurance Settlement Association (LISA).

Head said he was shocked that such information was being asked for at the last minute and thought the request was confusing.

"I think it's unreasonable and I'm amazed my members are responding to a three-day information request," Head said. "I think it's abusive."

He said he also found the timing unusual, noting that the state is in the middle of discussions over a new law to regulate the industry. The Ohio state House of Representatives passed a bill on Jan. 30 calling for a five-year waiting period before new policies can be sold. Legislation is currently being debated in the Senate.

Head speculated that the request for information was prompted by questions that Insurance Department Director Mary Jo Hudson has been asked in her testimony before the state Senate.

"I think in questioning in the Senate, she couldn't talk about any data points so now she's trying to obtain it on a rush basis," Head said.

Furthermore, he said the form to be filled in by providers is so poorly written that it's difficult to interpret. It asks for the number of Ohio viatical and national settlements the providers have executed from 2004 through 2007. It also asks for the amount of money paid to Ohio viators and the amount paid to viators nationally in those four years.

Head said he believes the questions are confusing because different states impose different reporting requirements. He added that providers may not maintain information for California or New York because both states only regulate viaticals, not life settlements.

Ohio Insurance Department officials weren't immediately available for comment.

Provider Life Settlement Solutions says it will no longer do business in several states that have passed new legislation imposing five-year waiting periods before new policies can be sold.

"Prior legislation in North Dakota and recent legislation in West Virginia, Nebraska and Iowa has resulted in regulations that lack clarity and leave many questions unanswered," Larry Simon, chief executive of Life Settlement Solutions, said in a letter sent May 1 to the firm's network of brokers and agents. "Due to this lack of clarity, and for the protection of your firm and ours, Life Settlement Solutions is no longer accepting policies from North Dakota or West Virginia and, as of May 15, will suspend acceptance of new submissions for policies owned in Iowa or Nebraska."

The San Diego-based company will not give up any of its provider licenses, however, the letter states.

A life settlements bill in the Louisiana Senate Committee on Insurance died on a 2-2 vote on April 30. The bill had called for a five-year waiting period before new policies could be settled.

SB 380, which was proposed by the state insurance department, was based on model legislation developed by the National Association of Insurance Commissioners (NAIC).

In a separate vote, a series of amendments to the legislation proposed by provider Coventry First was also rejected, as was a motion to continue action for a week.

"We were very disappointed that our efforts to strike a compromise on SB 380 to adopt specific anti-STOLI [stranger-originated life insurance] provisions, such as were reached in Kansas, Maine and Indiana, were rejected.  As a result, we support the Senate insurance committee's decision to reject the bill," Michael Freedman, senior vice president for government affairs for Coventry, said in an email.

STOLI is insurance taken out by seniors under the influence of investors who stand to benefit from the policies and who lack insurable interest.

The Life Insurance Settlement Association (LISA) accused two insurance industry trade groups of acting against their members' interests by supporting legislation that would impose a five-year waiting period before new life insurance policies could be settled.

LISA issued a statement on May 1 saying that the legislation supported by the National Association of Insurance and Financial Advisors (NAIFA) and the American Association of Life Underwriters (AALU) would benefit insurance carriers at the expense of NAIFA and AALU members, who are insurance producers.

"It seems to me that both NAIFA and AALU have lost their way," Doug Head, executive director of LISA, said in the statement. "These groups claim to support the interests of life producers, and yet they are actively working against their members by blindly supporting carrier-sponsored legislation that harms producers and the consumers they serve."

Head was referring to model legislation developed by the National Association of Insurance Commissioners (NAIC), which recommends the five-year holding period. The NAIC model act is the basis for legislation under consideration in statehouses across the country. Head contends that the NAIC model act has anti-producer provisions. Specifically, the legislation would require a $250,000 bond for insurance agents who help clients sell their policies. Head said that errors and omission insurance, which agents carry, is widely accepted as proof of financial responsibility in the insurance market.

Head also cited a recent article in California Broker magazine, which he says shows that both groups are "economically beholden to life insurance companies." The article was written by Daniel Harris, general counsel for LISA.

AALU's president, Lawrence Raymond, said in an April 21 letter to his members that his group came out against stranger-originated life insurance (STOLI) in 2004 before the American Council of Life Insurers (ACLI), which represents major carriers. The NAIC model act is meant to prevent STOLI.

Raymond said that LISA's stance "increases the chances that state legislators will not act or that the legislation they do enact will not be strong enough to deal with the problem."

LISA supports a competing model act developed by the National Conference of Insurance Legislators (NCOIL). NCOIL's proposed legislation would maintain the customary two-year waiting period before new policies could be sold.

A bill before Iowa Gov. Chet Culver that would regulate the state's life settlements market is likely to face legal challenges, according to Doug Head, executive director of the Life Insurance Settlement Association.

Head sent a nine-page letter to Culver on April 21 urging him not to sign the legislation.

"SF 2392 is bad public policy and bad law: It is protectionist, anti-consumer and illegal," Head said in his letter. "We respectfully suggest that your veto would protect the property rights of the citizens of Iowa and also protect the state from well-founded challenges under the Constitution and federal financial services laws."

SF 2392 would impose a five-year waiting period before new life insurance policies could be sold on the secondary market. The bill unanimously passed both chambers of the Iowa Legislature in April.

The legislation is based on a model act developed by the National Association of Insurance Commissioners (NAIC) that the settlement industry has been fighting state by state.

In his letter, Head pointed to judicial decisions backing LISA's view, including the U.S. Supreme Court decision in Grigsby v. Russell, and separate Iowa court cases.

Head said in his letter that he believes the bill will fail a court challenge because it "badly impairs property rights without a corresponding public benefit."

Maple Life Financial, a major purchaser of life settlements, said it has obtained its provider license from Georgia.

The Bethesda, Md., company said on April 25 that it has been conducting business in the state for many years, and had been grandfathered to do so after Georgia adopted licensing laws in 2005 regulating the life settlements market.

"We are gratified to be one of the few life settlement providers that have actually been issued a license in Georgia," chief executive Nate Evans said in a statement.

Ohio House Rep.  Matthew Barrett, one of the sponsors of life settlements legislation in the state, resigned on April 24 under pressure from House leadership following a scandal that first erupted last year.

Barrett was giving a presentation to high school students on the lawmaking process when he inserted a memory stick into a computer he was using and a photo of a nude woman appeared. At the time, he said the issue was a private matter. Barrett's teenage son was subsequently implicated in news reports.

Ohio House Democratic Leader Joyce Beatty, D-Columbus, said on April 24 that she asked for and received Barrett's resignation.

Beatty said in a statement that she demanded Barrett's resignation after he admitted he was not truthful about the photos displayed during the classroom presentation.

Barrett, a Democrat, and Rep. Jay Hottinger, a Republican, sponsored a bill that would require a five-year waiting period before new life insurance policies could be settled. That and other provisions of the life settlement bill are largely based on model legislation developed by the National Association of Insurance Commissioners (NAIC). The bill also contains some provisions from a model act developed by the National Conference of Insurance Legislators (NCOIL).

The Ohio House passed the bill on Jan. 30. Since then, it has been the subject of hearings in the state Senate Insurance, Commerce and Labor Committee, according to Shawn Busken, legislative aide for committee Chairman Steve Stivers. On April 23, the committee heard testimony on premium financing and property right issues. An April 30 hearing will be held on the definition of stranger-originated life insurance. A May 7 hearing will focus on the merits of the two-year waiting period, compared with a five-year waiting period, before new policies could be settled. 

MaxLife Fund Corp., a company that invests in, trades and acquires life settlements for institutional buyers, named three new board members.

Two of the new directors, Randy Delkus and Daniel Kahan, have served as advisory members to the San Diego-based company's board since September. Delkus is president of business incubator Anthony, Allan & Quinn, and Kahan is the founder of Canadian Life Line, a provider insurance-secured loans.

The third new director, Dan Schmitt, is chief executive of Anthony, Allan & Quinn.

Their appointments were announced on April 21.

Nebraska Gov. Dave Heineman signed a law on April 17 requiring new life insurance policies to be held for five years before they can be sold.

The state Legislature only had sent him LB 853 two days before. Heineman signed the legislation so quickly that the Life Insurance Settlement Associations (LISA) wasn't able to get him a letter in time opposing the measure.

"I was composing a veto letter when he signed it," said Doug Head, executive director of LISA. He said the quick signing meant there was "not much of an opportunity for reflection and consideration in the governor's office."

Nebraska's bill is based on model legislation developed by the National Association of Insurance Commissioners (NAIC). The controversial, five-year holding period is a key provision that attempts to prevent stranger-originated life insurance (STOLI). STOLI is insurance taken out at the behest of investors without insurable interest in the insured person.

A consumer representative to the National Association of Insurance Commissioners (NAIC) said he is pleased with a new conflict-of-interest policy adopted recently by the group.

"We're really thrilled about this. This is a good step forward," Bill Newton of the Florida Consumer Action Network said.

Newton was one of 11 consumer representatives to the NAIC who wrote to the group last September asking it to strengthen its conflict-of-interest policy. The consumers wrote a letter questioning whether former North Dakota Insurance Commissioner Jim Poolman had a conflict when he led the drafting of the NAIC's proposed model legislation on life settlements. Poolman and his state's Republican Party accepted $40,000 in campaign contributions from an executive of a premium finance company and the executive's wife. The model act that the NAIC later produced did not include provisions that would affect the executive's business.

The NAIC ultimately cleared Poolman of wrongdoing following an investigation. The association has refused to provide a copy of the report from its investigation to Newton or to Life Settlements Wire.

The NAIC's new ethics policy prohibits members from accepting a gift valued at more than $50; accepting a free meal or other entertainment paid for by a regulated entity, its trade group or other entities or people representing a regulated entity during an NAIC meeting; or soliciting or receiving money from regulated entities or their representatives before, during or after NAIC-sponsored meetings in the metropolitan area of the meeting.

The policy said, however, that the prohibition on free meals or other entertainment doesn't apply to receptions held at the NAIC meeting hotel headquarters open to all meeting attendees.

NAIC members are required to sign an acknowledgement that they've read the policy. The group's officers must additionally update annual disclosure statements.

The policy further says that failure to disclose conflicts may result in a reversal of a recommendation or vote that the member participated in or "attempted to affect through acts or omissions."