Topic: Life Insurance & Annuities

Wisconsin –Once a Life Insurance Policy is Issued, the Insurer cannot Invalidate the Policy for Lack of Insurable Interest

Judge Richard Posner, writing for a three judge panel for the Seventh Circuit and applying Wisconsin law, has affirmed a 2015 federal District Court decision and ruled that a STOLI policy (the original owner may not have had an insurable interest in the life of the insured), once issued by the insurer, is neither void nor voidable by the insurer for lack of insurable interest.

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Ninth Circuit Overturns Taxpayer-Friendly Decision in Demutualizations

The Ninth Circuit has overturned a favorable decision for taxpayers in demutualizations, ruling that taxpayers have a zero basis in their membership interests in the former mutual insurance company, and therefore also in the shares of stock received in a demutualization of the company. As a result, all proceeds from a subsequent sale of such shares is taxable as gain.

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NAIC Proposes Changes to Life Insurer Disclosure Requirements and Treatment of Investment Affiliates

This month, the NAIC set forth a variety of proposals relating to changes risk-based capital (“RBC”) requirements, as well as treatment of investment affiliates.  In particular, the NAIC seeks to require life insurers to actively disclosure how the use of captives to manage their A-XXX risks would impact the insurer’s RBC. 

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