At the end of October, the Rhode Island legislature approved the Life Settlements Act (Senate Bill 229 and companion House Bill 5199) (the “LSA”) which would establish procedures and requirements for life settlement transactions.  The LSA was sent to the Governor for signature on November 4.

The LSA is based on model legislation advanced by National Conference of Insurance Legislators.  The LSA prohibits stranger-owned life insurance transactions which are defined as the “practice or plan to initiate a life insurance policy for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest in the insured.”  The LSA does, however, permit life settlement of a policy two years after issuance.  The LSA sets forth various requirements with respect to life settlements, including the following:

1. Licensing for life settlement providers and brokers;
   
   
2. Prior filing and approval of life settlement contracts with the insurance commissioner;
   
   
3. Providing certain disclosures to owners and insurers;
   
   
4. Reporting of settled policies by providers as part of their annual statements; and
   
   
5. Disclosure of broker compensation information.

If signed into law by the Governor, the LSA will go into effect on July 1, 2010.