Earlier this week, the New York Legislature passed a bill establishing a comprehensive statutory framework for the regulation of life settlements.  The legislation is based on a model law drafted by the National Association of Insurance Legislators (NCOIL).  If the bill is signed by Governor David Paterson, New York would join the growing number of states regulating the life settlement market.

The legislation includes provisions that:

• Require life settlement providers, brokers and intermediaries to register and undergo a uniform licensure process through the Superintendent of the New York State Insurance Department;
  
  
• Prohibit the sale of life settlements during the two-year period after policy issuance except under certain specified circumstances;
  
  
• Prohibit life settlement brokers from receiving any compensation for examining, appraising, reviewing or evaluating any life settlement contract or giving advice with regard to such contract unless such compensation is based on a written memorandum signed by the party being charged and specifying the amount and terms of any compensation paid;
  
  
• Require disclosure to the policy owner of (1)   a full and complete description of all offers, counter-offers, acceptances and rejections related to the proposed life settlement, and (2)  a complete reconciliation of the amount of each life settlement provider’s gross offer to the net amount of proceeds to be received by the policy owner;
  
  
• Prohibit “Stranger Originated Life Insurance,” an arrangement in which third parties facilitate the purchase of life insurance policies intended to benefit individuals who have no insurable interest in the policy; and
  
  
• Identify prohibited practices and provide penalties (including new crimes of life settlement fraud and aggravated life settlement fraud) and a private right of action to consumers for certain defined prohibited practices.

If the legislation is signed into law, it would take effect 180 days after enactment except that the privacy, disclosure and stranger-originated life insurance provisions of the bill would take effect immediately.

For other recent posts on life settlement legislation in other jurisdictions, please click here, here, here, and here.

We will continue to follow this topic and provide further updates on InsureReinsure.com.