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[§431C-2]  Definitions


Published: 2015

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     [§431C-2]  Definitions.  As used in this

chapter, unless the content otherwise requires:

     "Advertisement" means any written,

electronic, or printed communication or any communication by means of recorded

telephone messages or transmitted on radio, television, the Internet, or

similar communications media, including film strips, motion pictures, and

videos, that is published, disseminated, circulated, or placed before the

public, directly or indirectly, for the purpose of creating an interest in or

inducing a person to purchase or sell, assign, devise, bequest, or transfer the

death benefit or ownership of a policy or an interest in a policy pursuant to a

life settlement contract.

     "Broker" means a person who, on

behalf of an owner and for a fee, commission, or other valuable consideration,

offers or attempts to negotiate life settlement contracts between an owner and

providers, represents only the owner, and owes a fiduciary duty to the owner to

act according to the owner's instructions, and in the best interest of the

owner, notwithstanding the manner in which the broker is compensated.  "Broker"

does not include an attorney, certified public accountant, or financial planner

retained in the type of practice customarily performed in their professional

capacity to represent the owner, whose compensation is not paid directly or

indirectly by the provider or any other person, except the owner.

     "Business of life settlements" means

an activity involved in but not limited to offering to enter into the soliciting,

negotiating, procuring, effectuating, monitoring, or tracking of life

settlement contracts.

     "Certificate" means a certificate

issued pursuant to a group policy.

     "Chronically ill" means:

     (1)  Being unable to perform at least two activities

of daily living, such as eating, toileting, transferring, bathing, dressing, or

continence;

     (2)  Requiring substantial supervision to protect the

individual from threats to health and safety due to severe cognitive

impairment; or

     (3)  Having a level of disability similar to that

described in paragraph (1) as determined by the United States Secretary of

Health and Human Services.

     "Commissioner" means the insurance

commissioner.

     "Financing entity" means an

underwriter, placement agent, lender, purchaser of securities, purchaser of a

policy or certificate from a provider, credit enhancer, or any entity that has

a direct ownership in a policy or certificate that is the subject of a life

settlement contract, but:

     (1)  Whose principal activity related to the

transaction is providing funds to effect the life settlement contract or

purchase of one or more policies; and

     (2)  Who has an agreement in

writing with one or more providers to finance the acquisition of life

settlement contracts.

The term shall not include

a non-accredited investor or purchaser.

     "Financing

transaction" means a transaction in which a licensed provider obtains

financing from a financing entity including, without limitation, any secured or

unsecured financing, any securitization transaction, or any securities offering

that is either registered or exempt from registration under federal and state

securities law.

     "Insured"

means the person covered under the policy being considered for sale in a life

settlement contract.

     "Life expectancy" means the

arithmetic mean of the number of months the insured under the policy to be

settled can be expected to live as determined by a life expectancy company

considering medical records and appropriate experiential data.

     "Life insurance producer" means any

person licensed in this State as a resident or nonresident insurance producer

who has received qualification for life insurance pursuant to article 9A of

chapter 431.

     "Life settlement contract" means:

  (a)(1)  A written agreement entered into between a

provider and an owner, establishing the terms under which compensation or any

thing of value will be paid, which compensation or thing of value is less than

the expected death benefit of the owner's policy or certificate, in return for

the owner's assignment, transfer, sale, devise, or bequest of the death benefit

or any portion of the policy or certificate for compensation, where the minimum

value of the contract is greater than a cash surrender value or accelerated

death benefit available under the policy or certificate at the time of an

application for a life settlement contract;

     (2)  The transfer

for compensation or value of ownership or beneficial interest in a trust or

other entity that owns such policy or certificate if the trust or other entity

was formed or availed of for the principal purpose of acquiring one or more

life insurance contracts, which life insurance contract insures the life of a

person residing in this State; or

     (3)  (A)  A written agreement for a loan or other lending

transaction, secured primarily by an individual or group policy; or

         (B)  A premium finance loan made for a policy

on or before the date of issuance of the policy where:

              (i)  The loan proceeds are not used solely to

pay premiums for the policy and any costs or expenses incurred by the lender or

the borrower in connection with the financing;

             (ii)  The owner receives on the date of the

premium finance loan a guarantee of the future life settlement value of the

policy; or

            (iii)  The owner agrees on the date of the premium

finance loan to sell the policy or any portion of its death benefit on any date

following the issuance of the policy.

     "Life settlement contract" does not

include:

  (b)(1)  A policy loan by a life insurance company

pursuant to the terms of the policy or accelerated death provisions contained

in the policy, whether issued with the original policy or as a rider;

     (2)  A premium finance loan, as defined herein, or any

loan made by a bank or other licensed financial institution, so long as neither

default on such loan nor the transfer of the policy in connection with such

default is pursuant to an agreement or understanding with any other person for

the purpose of evading regulation under this chapter;

     (3)  A collateral assignment of a policy by an owner;

     (4)  A loan made by a lender that does not violate any

insurance premium finance law of this State; provided that the loan does not

qualify as a life settlement contract;

     (5)  An agreement where all the parties:

         (A)  Are closely related to the insured by

blood or law; or

         (B)  Have a lawful substantial economic

interest in the continued life, health, and bodily safety of the person

insured, or are trusts established primarily for the benefit of such parties;

     (6)  Any designation, consent, or agreement by an

insured who is an employee of an employer in connection with the purchase by

the employer, or trust established by the employer, of life insurance on the

life of the employee;

     (7)  A bona fide business succession planning

arrangement:

         (A)  Between one or more shareholders in a corporation

or between a corporation and one or more of its shareholders or one or more

trusts established by its shareholders;

         (B)  Between one or more partners in a

partnership or between a partnership and one or more of its partners or one or

more trusts established by its partners; or

         (C)  Between one or more members in a limited

liability company or between a limited liability company and one or more of its

members or one or more trusts established by its members;

     (8)  An agreement entered into by a service recipient,

or a trust established by the service recipient, and a service provider, or a

trust established by the service provider, who performs significant services

for the service recipient's trade or business; or

     (9)  Any other contract, transaction, or arrangement

that is a life settlement contract and that the commissioner determines is not

of the type intended to be regulated by this chapter.

     "Net death benefit" means the amount

of the policy or certificate to be settled less any outstanding debts or liens.

     "Owner" means the owner of a policy

or a certificate holder under a group policy, with or without a terminal

illness, who enters or seeks to enter into a life settlement contract, but

shall not be limited to an owner of a policy or a certificate holder under a

group policy that insures the life of an individual with a terminal or chronic

illness or condition, except where specifically addressed.

     "Owner" does not include:

     (1)  Any provider or other licensee under this

chapter;

     (2)  A qualified institutional buyer as defined in

Rule 144A of the Securities Act of 1933, as amended;

     (3)  A financing entity;

     (4)  A special purpose entity; or

     (5)  A related provider trust.

     "Patient identifying information"

means an insured's address, telephone number, facsimile number, electronic mail

address, photograph or likeness, employer, employment status, social security

number, or any other information that is likely to lead to the identification

of the insured.

     "Person" means any natural person or

legal entity, including but not limited to a partnership, limited liability

company, association, trust, or corporation.

     "Policy" means an individual or group

policy, certificate, contract, or arrangement of life insurance owned by a

resident of this State, regardless of whether delivered or issued for delivery

in this State.

     "Premium finance loan" means a loan

made primarily for the purposes of making premium payments on a policy, which

loan is secured by an interest in such policy.

     "Provider" means a person, other than

an owner, who enters into or effectuates a life settlement contract with an

owner.  The term does not include:

     (1)  Any bank, savings bank, savings and loan

association, or credit union;

     (2)  A licensed lending institution or creditor or

secured party pursuant to a premium finance loan agreement that takes an

assignment of a policy or certificate as collateral for a loan;

     (3)  The insurer of a policy or rider to the extent of

providing accelerated death benefits, riders, or cash surrender value;

     (4)  Any natural person who enters into or effectuates

no more than one agreement in a calendar year for the transfer of a policy or

certificate for compensation or anything of value less than the expected death

benefit payable under the policy;

     (5)  A purchaser;

     (6)  Any authorized or eligible insurer that provides

stop loss coverage to a provider, purchaser, financing entity, special purpose

entity, or related provider trust;

     (7)  A financing entity;

     (8)  A special purpose entity;

     (9)  A related provider trust;

    (10)  A broker; or

    (11)  An accredited investor or qualified institutional

buyer as defined respectively in Rule 501 of Regulation D and Rule 144A of the

Securities Act of 1933, as amended, who purchases a life settlement contract

from a provider.

     "Purchased policy" means a policy or

certificate that has been acquired by a provider pursuant to a life settlement

contract.

     "Purchaser" means a person who pays

compensation or anything of value as consideration for a beneficial interest in

a trust that is vested with, or for the assignment, transfer, or sale of, an

ownership or other interest in a policy or a certificate that has been the

subject of a life settlement contract.

     "Related provider trust" means a

titling trust or other trust established by a licensed provider or a financing

entity for the sole purpose of holding the ownership or beneficial interest in

purchased policies in connection with a financing transaction, that includes a

written agreement with the licensed provider under which the licensed provider

is responsible for ensuring compliance with all statutory and regulatory

requirements and under which the trust agrees to make all records and files

relating to life settlement transactions available to the insurance division as

if those records and files were maintained directly by the licensed provider.

     "Settled policy" means a policy or

certificate that has been acquired by a provider pursuant to a life settlement

contract.

     "Special purpose entity" means a

corporation, partnership, trust, limited liability company, or other legal

entity formed solely to provide either directly or indirectly access to

institutional capital markets for a financing entity or provider in connection

with a transaction in which the securities in the special purpose entity:

     (1)  Are acquired by the owner or by a "qualified

institutional buyer" as defined in Rule 144A of the Securities Act of

1933, as amended; or

     (2)  Pay a fixed rate of return commensurate with

established asset-backed institutional capital markets.

     "Stranger-originated life insurance"

means a practice or plan to initiate a policy for the benefit of a third party

investor who, at the time of policy origination, has no insurable interest in

the insured, and includes:

     (1)  Arrangements in which life insurance is purchased

with resources or guarantees from or through a person or entity who at the time

of policy inception, could not lawfully initiate the policy by oneself or

itself, and where, at the time of inception, there is an arrangement or agreement,

whether verbal or written, to directly or indirectly transfer the ownership of

the policy, the policy benefits, or both, to a third party; and

     (2)  Trusts created to give the appearance of

insurable interest and used to initiate policies for investors.

     "Stranger-originated life insurance"

does not include those practices set forth in subsection (b) of the definition

of "life settlement contract".

     "Terminally ill" means having an

illness or sickness that can reasonably be expected to result in death in

twenty-four months or less. [L 2012, c 256, pt of §1]