§431E-2 - Definitions.
[§431E-2] Definitions. As used in thischapter, unless the content otherwise requires:
"Advertisement" means any written,electronic, or printed communication or any communication by means of recordedtelephone messages or transmitted on radio, television, the Internet, orsimilar communications media, including film strips, motion pictures, andvideos, which are published, disseminated, circulated, or placed before thepublic, directly or indirectly, for the purpose of creating an interest in orinducing a person to purchase or sell, assign, devise, bequest, or transfer thedeath benefit or ownership of a policy or an interest in a policy pursuant to alife settlement contract.
"Broker" means a person who, onbehalf of an owner and for a fee, commission, or other valuable consideration,offers or attempts to negotiate life settlement contracts between an owner andproviders, represents only the owner, and owes a fiduciary duty to the owner toact according to the owner's instructions, and in the best interest of theowner, notwithstanding the manner in which the broker is compensated. "Broker"does not include an attorney, certified public accountant, or financial plannerretained in the type of practice customarily performed in their professionalcapacity to represent the owner, whose compensation is not paid directly orindirectly by the provider or any other person, except the owner.
"Business of life settlements" meansan activity involved in but not limited to offering to enter into, soliciting,negotiating, procuring, effectuating, monitoring, or tracking of lifesettlement contracts.
"Certificate" means a certificateissued pursuant to a group policy.
"Chronically ill" means:
(1) Being unable to perform at least two activitiesof daily living, such as eating, toileting, transferring, bathing, dressing, orcontinence;
(2) Requiring substantial supervision to protect theindividual from threats to health and safety due to severe cognitiveimpairment; or
(3) Having a level of disability similar to thatdescribed in paragraph (1) as determined by the United States Secretary ofHealth and Human Services.
"Commissioner" means the insurancecommissioner.
"Financing entity" means anunderwriter, placement agent, lender, purchaser of securities, purchaser of apolicy or certificate from a provider, credit enhancer, or any entity that hasa direct ownership in a policy or certificate that is the subject of a lifesettlement contract, but:
(1) Whose principal activity related to thetransaction is providing funds to effect the life settlement contract orpurchase of one or more policies; and
(2) Who has an agreement inwriting with one or more providers to finance the acquisition of lifesettlement contracts.
The term shall not includea non-accredited investor or purchaser.
"Financingtransaction" means a transaction in which a licensed provider obtainsfinancing from a financing entity including, without limitation, any secured orunsecured financing, any securitization transaction, or any securities offeringthat is either registered or exempt from registration under federal and statesecurities law.
"Insured"means the person covered under the policy being considered for sale in a lifesettlement contract.
"Life expectancy" means thearithmetic mean of the number of months the insured under the policy to besettled can be expected to live as determined by a life expectancy companyconsidering medical records and appropriate experiential data.
"Life insurance producer" means anyperson licensed in this State as a resident or nonresident insurance producerwho has received qualification or authority for life insurance coverage or alife line of coverage pursuant to article 9A of chapter 431.
"Life settlement contract" means:
(a)(1) A written agreement entered into between aprovider and an owner, establishing the terms under which compensation or anything of value will be paid, which compensation or thing of value is less thanthe expected death benefit of the owner's policy or certificate, in return forthe owner's assignment, transfer, sale, devise, or bequest of the death benefitor any portion of the policy or certificate for compensation, where the minimumvalue of the contract is greater than a cash surrender value or accelerateddeath benefit available under the policy or certificate at the time of anapplication for a life settlement contract;
(2) The transferfor compensation or value of ownership or beneficial interest in a trust orother entity that owns such policy or certificate if the trust or other entitywas formed or availed of for the principal purpose of acquiring one or morelife insurance contracts, which life insurance contract insures the life of aperson residing in this State; or
(3) (A) A written agreement for a loan or other lendingtransaction, secured primarily by an individual or group policy; or
(B) A premium finance loan made for a policyon or before the date of issuance of the policy where:
(i) The loan proceeds are not used solely topay premiums for the policy and any costs or expenses incurred by the lender orthe borrower in connection with the financing;
(ii) The owner receives on the date of thepremium finance loan a guarantee of the future life settlement value of thepolicy; or
(iii) The owner agrees on the date of the premiumfinance loan to sell the policy or any portion of its death benefit on any datefollowing the issuance of the policy.
"Life settlement contract" does notinclude:
(b)(1) A policy loan by a life insurance companypursuant to the terms of the policy or accelerated death provisions containedin the policy, whether issued with the original policy or as a rider;
(2) A premium finance loan, as defined herein, or anyloan made by a bank or other licensed financial institution, so long as neitherdefault on such loan nor the transfer of the policy in connection with suchdefault is pursuant to an agreement or understanding with any other person forthe 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 anyinsurance premium finance law of this State; provided that the loan does notqualify as a life settlement contract;
(5) An agreement where all the parties:
(A) Are closely related to the insured byblood or law; or
(B) Have a lawful substantial economicinterest in the continued life, health, and bodily safety of the personinsured, or are trusts established primarily for the benefit of such parties;
(6) Any designation, consent, or agreement by aninsured who is an employee of an employer in connection with the purchase bythe employer, or trust established by the employer, of life insurance on thelife of the employee;
(7) A bona fide business succession planningarrangement:
(A) Between one or more shareholders in acorporation or between a corporation and one or more of its shareholders or oneor more trusts established by its shareholders;
(B) Between one or more partners in apartnership or between a partnership and one or more of its partners or one ormore trusts established by its partners; or
(C) Between one or more members in a limitedliability company or between a limited liability company and one or more of itsmembers 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 atrust established by the service provider, who performs significant servicesfor the service recipient's trade or business; or
(9) Any other contract, transaction, or arrangementthat is a life settlement contract and that the commissioner determines is notof the type intended to be regulated by this chapter.
"Net death benefit" means the amountof the policy or certificate to be settled less any outstanding debts or liens.
"Owner" means the owner of a policyor a certificate holder under a group policy, with or without a terminalillness, who enters or seeks to enter into a life settlement contract, butshall not be limited to an owner of a policy or a certificate holder under agroup policy that insures the life of an individual with a terminal or chronicillness or condition, except where specifically addressed.
"Owner" does not include:
(1) Any provider or other licensee under thischapter;
(2) A qualified institutional buyer as defined inRule 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 mailaddress, photograph or likeness, employer, employment status, social securitynumber, or any other information that is likely to lead to the identificationof the insured.
"Person" means any natural person orlegal entity, including but not limited to a partnership, limited liabilitycompany, association, trust, or corporation.
"Policy" means an individual or grouppolicy, certificate, contract, or arrangement of life insurance owned by aresident of this State, regardless of whether delivered or issued for deliveryin this State.
"Premium finance loan" means a loanmade primarily for the purposes of making premium payments on a policy, whichloan is secured by an interest in such policy.
"Provider" means a person, other thanan owner, who enters into or effectuates a life settlement contract with anowner. The term does not include:
(1) Any bank, savings bank, savings and loanassociation, or credit union;
(2) A licensed lending institution or creditor orsecured party pursuant to a premium finance loan agreement that takes anassignment of a policy or certificate as collateral for a loan;
(3) The insurer of a policy or rider to the extent ofproviding accelerated death benefits, riders, or cash surrender value;
(4) Any natural person who enters into or effectuatesno more than one agreement in a calendar year for the transfer of a policy orcertificate for compensation or anything of value less than the expected deathbenefit payable under the policy;
(5) A purchaser;
(6) Any authorized or eligible insurer that providesstop loss coverage to a provider, purchaser, financing entity, special purposeentity, 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 institutionalbuyer as defined respectively in Rule 501 of Regulation D and Rule 144A of theSecurities Act of 1933, as amended, who purchases a life settlement contractfrom a provider.
"Purchased policy" means a policy orcertificate that has been acquired by a provider pursuant to a life settlementcontract.
"Purchaser" means a person who payscompensation or anything of value as consideration for a beneficial interest ina trust that is vested with, or for the assignment, transfer, or sale of, anownership or other interest in a policy or a certificate that has been thesubject of a life settlement contract.
"Related provider trust" means atitling trust or other trust established by a licensed provider or a financingentity for the sole purpose of holding the ownership or beneficial interest inpurchased policies in connection with a financing transaction, that includes awritten agreement with the licensed provider under which the licensed provideris responsible for ensuring compliance with all statutory and regulatoryrequirements and under which the trust agrees to make all records and filesrelating to life settlement transactions available to the insurance division asif those records and files were maintained directly by the licensed provider.
"Settled policy" means a policy orcertificate that has been acquired by a provider pursuant to a life settlementcontract.
"Special purpose entity" means acorporation, partnership, trust, limited liability company, or other legalentity formed solely to provide either directly or indirectly access toinstitutional capital markets for a financing entity or provider in connectionwith a transaction in which the securities in the special purpose entity:
(1) Are acquired by the owner or by a "qualifiedinstitutional buyer" as defined in Rule 144A of the Securities Act of1933, as amended; or
(2) Pay a fixed rate of return commensurate with establishedasset-backed institutional capital markets.
"Stranger-originated life insurance"or "STOLI" means a practice or plan to initiate a policy for thebenefit of a third party investor who, at the time of policy origination, hasno insurable interest in the insured, and includes:
(1) Arrangements in which life insurance is purchasedwith resources or guarantees from or through a person or entity who at the timeof policy inception, could not lawfully initiate the policy by oneself oritself, and where, at the time of inception, there is an arrangement oragreement, whether verbal or written, to directly or indirectly transfer theownership of the policy, the policy benefits, or both, to a third party; and
(2) Trusts created to give the appearance ofinsurable interest and used to initiate policies for investors.
"STOLI" does not include thosepractices set forth in subsection (b) of the definition of "lifesettlement contract".
"Terminally ill" means having anillness or sickness that can reasonably be expected to result in death intwenty-four months or less. [L 2008, c 177, pt of §1]