The NAIC passed the Viatical Settlements Model Act
in 2007 and created protections against STOLI.
If the insured resides in a state not requiring such licensing, then there must be compliance with certain provisions of the Viatical Settlements Model Act
(the Model Act) and requirements of the National Association of Insurance Commissioners (NAIC) relating to standards for evaluating the reasonableness of payments.
In June 2007, the National Association of Insurance Commissioners adopted several amendments to the Viatical Settlements Model Act
, also aimed at STOLI, which it said would both strengthen consumer protections in the life settlement marketplace and impose a five-year ban for settling a life insurance policy.
In an attempt to clear up the confusion, the National Association of Insurance Commissioners introduced new amendments to its existing Viatical Settlements Model Act
in June 2007.
* NAIC Viatical Settlements Model Act
, http://greenwichsettlements.com/ naic.pdf
With regard to terminally ill individuals, the viatical settlement provider must meet the requirement of: (1) Sections 8 and 9 of the Viatical Settlements Model Act
prepared by the National Association of Insurance Commissioners; and (2) the Model Regulations of the National Association of Insurance Commissioners relating to standards for evaluation of reasonable payments in determining amounts paid by the viatical settlement provider in connection with the purchase or assignment of life insurance contracts.
(9.) The Viatical Settlements Model Act
[subsections] 5, 10 (1994), available at http://www.insure.corn/life/viatical/vsma.html (last visited Apr.
(59) The National Association of Insurance Commissioners has promulgated a Viatical Settlements Model Act
and Model Regulation.
Specifically, with regard to terminally ill insureds, a person meets the requirements if he meets the requirements of the Viatical Settlements Model Act
of the National Association of Insurance Commissioners (NAIC), Sections 8 and 9; and meets the NAIC's requirements (relating to standards for evaluation of reasonable payments) in determining amounts paid by such persons in connection with such purchases or assignments.
Regarding the 5-year ban on settlement of contracts in the current Viatical Settlements Model Act
of the National Association of Insurance Commissioners, Bibliowicz said that "personally, I am not a fan of the 5-year provision" or other "arbitrary requirements." Such requirements can result in an industry that has a lot of loopholes, she noted.
In some states, the term "viatical settlement" may include both a life settlement and a viatical settlement; in other states both may be referred to as a "life settlement." (13) In many states, the statute dealing with life settlements will simply be titled "Viatical Settlements Act." (14) The first drafting note to the recent amendments to the NAIC's Viatical Settlements Model Act
anticipates this confusion, and deals with it by stating that "In implementing this model act, states may elect to use terminology referring to life settlements rather than viatical settlements."
Because of the need to protect insureds and to create a transparent and fair viatical settlements market, the National Association of Insurance Commissioners developed the Viatical Settlements Model Act
in 1993 as well as accompanying rules to guide states in their regulation of the viatical settlements industry.