[§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]