BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Jackie Speier, Chair
AB 243 (Vargas) Hearing Date: June 29, 2005
As Amended June 14, 2005
Fiscal: Yes
Urgency: No
VOTES: Asm. Ins. (4/27/05):8-2/ Pass
Asm. Floor (6/01/05):52-24/ Pass
SUMMARY
Would permit consumers and others with life insurance policies to
sell their in-force policies to companies that wish to buy them,
rather than merely allowing the policies to lapse or to be
surrendered to the insurer
DIGEST
Existing law
1. Regulates, through the insurance code, viatical
settlements --the sale of a life insurance policy by a person
with a catastrophic or life-threatening condition-to purchasers
other than the insurer for anything less than the death
benefits of the insurance policy, but does not separately
define or regulate life settlements except insofar as life
settlements may be deemed securities, thereby governed by the
corporations code, under some circumstances (see #12 and #13,
below);
2. Does not define catastrophic or life-threatening condition,
despite relying on this term of art to identify viatical
settlements;
3. Permits the purchasers of viatical settlements to collect the
death benefit of the policy upon the death of the covered
individual;
4. Prohibits the purchaser of the policy from paying for loans,
cash surrender values or other benefits made by the insurer
prior to sale;
AB 243 (Vargas), PageB
5. Requires the purchaser of a viatical settlement to obtain a
doctor's determination that the seller is of sound mind and
under no constraint or undue influence, and a witnessed
signature of the seller on an acknowledgement of complete
understanding of the settlement and the related death benefits;
6. Makes it a misdemeanor to fail to obtain #5;
7. Establishes a separate license for viatical settlement sales,
requirements for holding and surrendering the license,
penalties for violations of the standards of sale, requirements
to file a copy of each viatical settlement with the Department
of Insurance (DOI), disclosures by sales representatives of
alternatives to viatical sales and possible ineligibility for
public programs as a result of a settlement, and broad powers
of the Insurance Commissioner (IC) to regulate the affairs of
viatical settlement companies;
8. Defines an insurable interest for purposes of life insurance
as "?.an interest based upon a reasonable expectation of
pecuniary advantage through the continued life, health or
bodily safety of another person and consequent loss by reason
of that person's death or disability or a substantial interest
engendered by love and affection in the case of individuals
closely related by blood or law";
9. Establishes that a person has an "unlimited insurable
interest" in their own life;
10. Further establishes that employers have an insurable
interest in their own employees or officers and directors when
the death of those persons would cause financial loss to the
employer;
11. Notwithstanding #10, prohibits issuing life insurance on
employees except those that are "exempt" employees pursuant to
Labor Code Section 515 (generally non-hourly employees);
12. Defines viatical and life settlements as securities but
exempts the offer or sale of viatical or life settlements, or
fractionalized interests therein, from qualifying as a security
if sold to qualified purchasers, including investment pools
and, broadly speaking, other types of sophisticated investors;
13. Makes the exemption in #12 contingent upon a number of
AB 243 (Vargas), PageC
disclosures regarding the offering, including but not limited
to the name and address of the issuer, meeting suitability
standards for an investor, a description of the issuer's type
of business, audit reports, notice of right to rescind the
purchase of the security, etc.
14. Permits life agents to offer viatical and life settlements
exempted under #12 without having to obtain a broker-dealer
(securities) license.
This bill
1. Would include within the definition of a viatical settlement an
agreement with a seller of an insurance policy (viator) to
transfer ownership or change the beneficiary designation at a
later date regardless of the date that compensation is paid to
the viator;
2. Would define "catastrophic or life threatening illness" to
mean any of the following:
a. An illness or condition that can reasonably be expected
to result in death in 24 months or less;
b. An inability to perform at least two activities of
daily living, including eating, toileting, transferring,
bathing, dressing and continence;
c. Severe cognitive impairment requiring substantial
supervision to protect the individual from threats to his or
her health and safety;
d. A level of disability similar to that described in (c),
as determined by the Secretary of Health and Human Services;
3. Would establish a detailed body of law to regulate the life
settlements industry, including, but not limited to, the
following:
a. A definition of "advertising," "business of life
settlements," "financing entity," and "fraudulent life
settlement act" (page 5);
b. A prohibition on fraudulent acts that, generally
speaking, would define as fraudulent those acts and
omissions or material misrepresentations of the transaction
of the sale of a life settlement contract to a buyer, and
including material misrepresentations of the terms of an
application of a life settlement contract, how premiums of
AB 243 (Vargas), PageD
the existing policy would be paid, rules regarding changes
in ownership, a financing provision, etc.; (pages 5 - 6)
c. A prohibition of various actions that would further a
fraud or prevent the detection of fraud, such as hiding the
assets of a life settlements company or person engaged in
the business, destroying or moving records, filing false
evidence with the IC or with another jurisdiction,
recklessly brokering or otherwise dealing in a life
settlement contract, facilitating the change of the state of
a viator to avoid being covered by the law of California
(pages 6 - 7);
d. A definition of a life settlement contract, generally
speaking, as a written agreement establishing the terms
under which compensation or anything of value will be paid,
which compensation or value is less than the expected death
benefit of a policy, in return for the seller's assignment,
transfer, sale, devise, or bequest of the death benefit or
ownership of any portion of the policy, and an agreement to
transfer ownership or change the beneficiary at a later
date, but not including a viatical settlement (as defined
above in "Existing law, #1) (page 7);
e. A definition of "life settlement provider" as a
person, other than a seller, who enters into or effectuates
a life settlement contract, but not including (among others)
banks, savings and loans, the act of taking assignment of a
policy for a loan, financing entities, special purpose
entities, accredited investor or qualified institutional
buyers (page 8);
f. A definition of "life settlement broker" as, generally
speaking, those who earn a commission from providers for
negotiating life settlement contracts between sellers and
providers (page 7);
g. A requirement that a person operating as a life
settlement provider first obtain a license as a viatical
settlement provider (page 9);
h. A prohibition on a person operating as a life
settlement broker unless they have been a licensed
California life insurance agent for at least one year, and
contingent upon the filing a notice with the DOI that they
are brokering life settlements, such notice being filed
AB 243 (Vargas), PageE
within 30 days after they begin to broker such settlements
(pages 9 bottom, 10 top);
i. A grant of authority to the IC to suspend, revoke or
refuse to issue a license to a provider, as specified (page
10), to impose similar restrictions on licensing of brokers
(page 11), and to further impose penalties of not more than
$10,000 for each violation of the law by a provider and not
more than $5,000 for each violation by a broker (page 11);
j. A requirement that a life settlement provider file
specified information as an annual statement to the IC on or
before March 1st, and a prohibition on the disclosure of
medical information, financial information or the
identification of the insured to any person except when the
disclosure is necessary in response to an investigation by
the IC or as otherwise specified (pages 12 - 13);
aa.A requirement that the following disclosures be made to the
seller by either the provider or broker (pages 13 - 14):
i. Possible alternatives to life settlements;
ii. A statement that the broker represents only
the seller and owes a duty to the seller to act
according to the seller's instructions and in the
best interests of the seller;
iii. Some of the proceeds may be taxable;
iv. Receipt of proceeds may adversely impact the
seller's eligibility for Medicare benefits;
v. The seller has the right to rescind the sale
for either 30 days after the settlement contract
date or 15 days after receipt of proceeds, whichever
comes first, and the seller must notify the provider
and return funds and pay the fees that were
otherwise paid by the provider for the transaction
(right of rescission at lines 38-40 page 13 and
lines 1 - 11 page 14);
vi. Funds will be sent to the seller within three
business days after the insurer acknowledges that
the ownership of the policy has changed;
vii. An explanation of other rights under the
policy of life insurance that may be impacted by the
life settlement;
viii. A health exam may be required for the
settlement;
AB 243 (Vargas), PageF
bb.A requirement for various other disclosures and mandatory
language prior to the sale being made (pages 14 - 15);
cc.A requirement that a doctor submit a written statement that
the seller is of sound mind and under no constraint or undue
influence (page 15);
dd.A requirement that the seller consent to release of medical
information if the seller acquired the life insurance within
the prior three years (page 16);
ee.A requirement for witnessed documents of consent to the
sale of the life policy, including a requirement that
terminal patients state that the condition was diagnosed
after the policy was obtained (page 16);
ff.A prohibition on entering into a life settlement contract
within two years of the purchase of the life policy, except
as specified (page 18);
gg.A provision permitting a life settlement provider to resell
the contract to another life settlement provider;
hh. A provision prohibiting the life settlement company
from paying various fees that might be incurred
(doctor/lawyer/accountant) by a seller;
ii.Broad language prohibiting fraudulent acts and granting the
IC extensive powers to combat fraudulent acts (pages 19 -
23);
jj. Language specifying that nothing in the law shall
preempt or otherwise limit application of the securities
laws to these transactions;
aaa.Delays operation of Sections 10127.24 and 10127.34 until
January 1, 2006, and of all other provisions of the bill
until April 1, 2006.
COMMENTS
1. Purpose of the bill . To permit life insurance policyholders
to sell their policies to someone who is not the original
insurer (a.k.a. a life settlement company).
2. Background .
AB 243 (Vargas), PageG
Life settlement vs. viatical-what's the difference? Some would
argue that there is no difference because of the mathematics of
viatical and life settlements. This is fair. Determining the
likelihood that someone will die at a future date is the same
for both types of settlements. However, this similarity also
misses a major point of distinction. Viatical settlements, at
least historically, have been made with people who are
terminally ill. The fact that these persons are terminal makes
them prey for unscrupulous buyers of their life insurance.
This has necessitated a great deal of regulatory action. The
market for viatical settlements flourished for a period of time
and is now, according to supporters of this bill, relatively
minimal because of problems with fraud in the viaticals market.
Life settlements typically involve the sale of life insurance
by someone who is between 65 and 70 years of age. While they
may not be in perfect health, there is arguably no urgency to
sell the life insurance policy. The seller therefore has more
time to shop the market for buyers, and more opportunities to
reject inadequate offers or, in extreme cases, to seek legal
counsel if the deal sours. The lack of urgency, arguably, may
give sellers many more opportunities to defend their interests
in these types of transactions.
Basic public policy issue. Despite the length of this bill and
the apparent complexity of the topic, one basic public policy
question posed by the bill is quite simple: "Should those who
have life insurance policies be able to sell them or assign the
benefits, beyond simply allowing the policy to lapse or
surrendering the policy to the insurer for its cash surrender
value?"
Who is the seller? Discussions of this bill may lead one to
believe that sellers will be individuals. However, it should
be noted that companies may also sell life policies that they
purchase. Companies often purchase "key man" life insurance
policies on key senior executives who are so important to the
ongoing financial health of the company that their death would
severely damage the company's capacity to continue. These
policies would also be regulated at time of sale under the
provisions of AB 243. Recent California law bans "janitor
insurance" that some companies purchased as a speculative
investment on their non-exempt employees (such as janitors and
other hourly workers).
AB 243 (Vargas), PageH
The state of current law. In the context of catastrophic or
life-threatening disease, California law already permits
viatical settlements to exist, and the state regulates them.
California does not yet regulate life settlements, except
insofar as they are securities, but they already exist.
The issue of viatical settlements arose, in part, as a result
of the AIDS epidemic. Those with life insurance policies and
obligations to meet end-of-life care began to sell their death
benefits. As noted above, these sales became fraught with
problems of abuse as persons who were desperate for financial
options in the midst of crippling disease were victimized. The
value received by sellers, many of whom were in pain or
operating under financial duress, was often minimal compared to
the death benefits. Financial benefits of sales were sometimes
delayed or denied as severely ill persons struggled to make
ends meet, and some died before resolution of disputes with
buyers.
Viatical settlements were first regulated by California in 1990
and the law was last amended in 1997. Various protections were
created so that sellers were able to obtain disclosure and
guarantees of rescission, as well as remedies through the DOI,
such as fraud investigations and licensing actions.
In information provided by Coventry First to the committee, the
Wall Street Journal of May 26, 2005 noted that "A controversial
new life-insurance pitch promises free or low-cost coverage to
wealthy people over 70. The catch: a complete stranger could
benefit from their death. A financing company lends you or a
family trust money so that you can buy a large insurance policy
on your life. The loan lasts for at least two years. If you
die during the loan period, your estate must pay back the loan,
plus interest and fees. What's left goes to your heirs. If
you survive, you can keep the policy and pay back the loan. Or
you can transfer the policy to the lender?.This type of
transaction is known as non-recourse premium financing?
Critics, including some insurance companies, contend the
practice alters the purpose of life insurance by treating it as
an investment vehicle for outside speculators."
Coventry First also provided the committee with other articles.
In a May 31, 2005 article, the Wall Street Journal cited a new
report (funded by MassMutual Financial Group) from Deloitte
Consulting and the University of Connecticut that found that it
AB 243 (Vargas), PageI
is best to simply keep policies so that the wealth of an estate
can be maximized. This same study found, however, that selling
a life insurance policy to a life settlement company is often
better than surrendering the policy to the insurer for the cash
surrender value. Of 534 life settlement contracts studied in
New York, the companies paid, on average, 20% of the face
amount of the policy.<1> In contrast, according to the study,
"?..'the intrinsic economic value of the policy'-the estimated
future payout minus future premium costs-was an estimated 64%
of the policy's face amount."<2>
According to the Life Settlement Institute, insurers tend to
discourage life settlements because 88% of all universal life
insurance policies never result in a death claim.<3>
3. Support . Coventry First is a large life-settlement company.
Coventry believes that life settlements permit policyholders to
obtain higher payments for unneeded life insurance than would
be the case if the policyholder simply surrendered the policy
to the insurer and accepted the cash surrender value. The bill
is "based on the Model Viatical Settlements Act developed by
the National Association of Insurance Commissioners." The act
regulates both viatical and life settlements under one act.
[Staff notes that AB 243 defines life and viatical settlements
separately and is therefore a departure from the Model Act,
although the sponsors believe that this departure makes the law
clearer.]
4. Neutral/Opposition . The Association of California Life &
Health Insurance Companies is neutral on the bill as in print
on June 14, 2005.
The DOI is neutral on this bill if it is amended to deal with
substantial shortcomings perceived by the DOI in the current
language and approach to public policy problems. DOI generally
supports statutory language in the area of life settlements
because it is currently unregulated. These are excerpts from
the DOI's letter. DOI personnel will be present to elaborate
on these excerpts:
Our main problems with AB 243 are: (1) it provides a
----------------------------
<1> Wall Street Journal, May 31, 2005, Page D2.
<2> Ibid.
<3> The Life Settlement Institute is an industry trade group of
life settlement providers. Coventry is a member of the Life
Settlement Institute.
AB 243 (Vargas), PageJ
definition of "catastrophic and life threatening" that is too
narrow and eliminates conditions such as AIDS, coronary artery
disease requiring surgery and other serious conditions; (2) it
exempts third party funding entities from licensure as life
settlement providers; (3) it requires a "knowingly" or intent
to defraud" standard for fraudulent settlement acts, and
contains other enforcement provisions that are inconsistent
with the Insurance Code; (4) it allows life producers to
transact life settlements without having to obtain a license
which is a problem given our experience in the viatical arena;
(5) the reporting requirements are too narrow; (6) the
disclosure requirements are too narrow; and (7) the proposed
legislation provides for something less than an unconditional
right of rescission to sellers of a policy.
DOI then offered amendments to deal with every perceived
shortcoming in the bill. Staff is recommending at least one of
those amendments, below, and the DOI will be present to explain
all of its suggestions.
Regarding a key definition in the bill, the DOI had these
comments:
Replace the definition of "catastrophic or life threatening" to
comport with the Department's long-standing interpretation of
what constitutes a viatical settlement. The proposed
legislation's definition is too narrow, and creates a standard
where one could reasonably question whether or not individuals
meeting the criteria have the requisite capacity to engage in a
viatical settlement transaction. Moreover, the industry's
proposed definition would prevent the inclusion of many
conditions that the Department currently considers
"catastrophic or life threatening," the most common of which is
AIDS.
The DOI continued: Section 10113.209(a)(3)'s reference to
persons with a "terminal or chronic illness" underscores that
the effect of AB 243 weakens the Commissioner's current
jurisdiction over viatical settlements. That is, under the
Commissioner's existing interpretation of "catastrophic or life
threatening," persons with a terminal or serious, chronic
illness would typically qualify for a viatical as opposed to a
life settlement. Similarly, Section 10113.208(a)(11) regulates
the frequency of contacts where the insured has a life
expectancy of "one year or less." Such individuals, however,
clearly fall within the area of viatical, as opposed to life
AB 243 (Vargas), PageK
settlements. Thus, the Commissioner believes that the effect
of these provisions weakens the Department of Insurance's
existing jurisdiction to regulate viatical settlements.
Other comments about the bill. Staff received a phone call
from a viatical settlements broker who was fervently opposed to
the bill, and she stated that others would soon be calling the
committee. Ms. Carol Fiedler (Corte Madera) opposes the bill
for many reasons. First, she believes that the persons who are
selling these policies should be referred to a licensed
viatical settlements broker, and she believes that life
settlements should only be sold by those who hold a viatical
settlements license. Life insurance agents, who could sell
policies on behalf of buyers pursuant to the language in the
bill, simply don't have the proper training, she believes, to
best represent the interests of consumers.
Furthermore, they may try to send the policy and confidential
medical information to all potential buyers rather than
focusing on those most likely to buy. This means that the
confidential information will be spread around many businesses,
all with the possibility of privacy violations. She notes that
life agents won't have to even send in the minimal paperwork
and fee to notify the DOI of the agent's sales until 30 days
after the first sale. She strongly advises that at least these
agents be required to first send in the notice and fee so that
they are on record with the DOI in advance of selling to
consumers.
5. No comments from the Department of Corporations . Staff has
received no formal comments from the Department of Corporations
(DOC). Staff is aware that a letter was sent by the DOC to
Coventry in February, and that responses to that letter were
only recently received by the DOC. Staff does not have the
responses, but the letter generally was a wide-ranging inquiry
based upon the language of the bill at that time. Since that
time, the bill was amended to make clear that nothing in the
bill is intended to preempt or limit the application of the
California Uniform Securities Act or the authority of the
Commissioner of Corporations (Proposed Section 10127.34).
Staff is aware that the DOC has few, if any, investigators to
conduct investigations into fraud that may occur should the
market for life settlements begin to grow in dollar volume.
Fraud, if it happens, would likely occur in the sale of
interests in life settlement providers or in pools of life
AB 243 (Vargas), PageL
settlements that they offer to investors. At the present time,
providers appear to be funded by relatively sophisticated
investors, AIG being a noteworthy investor in life settlements
originated through Coventry. However, as the market becomes
regulated, supply and demand will fluctuate and at some point
an investment in pools of life settlements may become
relatively inexpensive. This would probably result in pool
investors who are far less sophisticated than AIG. This would
suggest that fraud on investors would increase unless the DOC
is actively supervising the market.
6. Questions .
a. The Department of Corporations has few, if any,
investigators to conduct investigations into fraud that may
occur should the market for life settlements investments
begin to grow in dollar volume.
i. Should the bill be amended to create
a requirement that life settlement providers pay a
specified fee to the DOC for purposes of supporting
a small staff of fraud investigators, at least for
a period of time such as the next five years? It
may be in the interests of providers, as well as
the public and investors, that this regulatory
capacity be established.
b. It is difficult for staff to offer informed analysis of
the securities implications of this bill without the formal
input of the DOC. Should the bill be amended to require the
DOC to promulgate regulations about life settlements?
c. How will an expanding market in life settlements
influence the price of life insurance?
d. Is there a standard way to compare the offers of various
life settlement providers in an "apples-to-apples" fashion to
evaluate the relative merits of different offers? If so,
should this standard comparison technique either be required
by law within this bill or developed through regulation, in
order to ensure that sellers have the best available tools to
evaluate offers?
e. Should life settlement brokers be required to have
separate licenses, as the DOI recommends? Would this result
in sellers only being able to deal with brokers who have a
AB 243 (Vargas), PageM
specific interest in getting the policy sold, rather than
dealing with brokers who could help a seller identify the
broader interest in determining if a sale is even prudent?
7. Suggested Amendments .
a. First, it's important to understand that the bill separates
out viatical settlements and life settlements for purposes of
regulation. In the process of doing so, the bill defines the
concept of life-threatening and catastrophic illness, a term
currently invoked but undefined in California law.
California law presently requires that a viatical settlement
agreement be accompanied by a doctor's statement that the
person who is entering into the settlement is of sound mind
(page 4, starting at line 8). This bill defines a person with
a life-threatening or catastrophic illness as one who, among
other things , is a person who has "severe cognitive
impairment requiring substantial supervision to protect the
individual from threats to his or her health and safety"
(page 3, lines 22 - 24). These two provisions of the bill
are logically at-odds with each other and the bill should not
be passed without this problem being resolved.
Staff is recommending that the DOI's definition of
catastrophic or life-threatening illness or condition" be
adopted (see "c," below). It is based upon the DOI's
experience in trying to regulate viatical settlements and in
trying to assist California consumers or their survivors, and
is therefore arguably a more informed standard than the NAIC
model that is supported by the proponents of the bill. At
least in staff's judgment, NAIC models tend to be a
compromise amongst various state regulators, a form of
informed judgment but not one that necessarily reflects the
history of California on any given subject.
Adopting the DOI's definition would eliminate the current
inconsistency in the bill's language. If the committee
chooses not to adopt the DOI's definition, then staff
recommends that lines 14 - 27 on page 3 be deleted. One
simply cannot seriously argue that a person with severe
cognitive impairment requiring substantial supervision is a
person who might receive a doctor's note saying that they are
mentally competent to enter into a viatical agreement.
b. On page 4 at line 8, strike the term "licensed medical
AB 243 (Vargas), PageN
practitioner" and insert "medical doctor licensed pursuant
to" and then insert the appropriate code citation for a
California-licensed medical doctor. It would be bad public
policy to permit a chiropractor who is a licensed medical
practitioner to certify the mental competency of the seller.
Staff is recommending this amendment due to past history on
this issue. The mentally-deranged individual who rammed his
semi-tractor-trailer truck onto the steps of the California
State Capitol was licensed as a truck driver. Obtaining a
license required a physical exam and the exam included a
conclusion by the examining physician as to mental
competency. The truck driver received his favorable physical
examination from an out-of-state chiropractor.
c. On page 10 at line 4, strike "after" and insert "before".
On page 10 at line 12, after "article." Insert: "The life
and disability insurance agents shall file with the
commissioner a declaration that the person's life and
disability agent license is valid and in good standing. If
the commissioner determines that the agent's life and
disability agent license is invalid or not in good standing,
or the agent failed to submit any additional information
requested by the commissioner, the commissioner may suspend
the agent's ability to transact or to otherwise be involved
in life settlements."
The bill proposes to permit an agent to begin selling life
settlements and then to notify the DOI afterwards. Staff
recommends that the agent be required to notify the DOI
before beginning to sell, and the DOI can then determine if
the person has a troubled history and take action to prevent
an agent with a troubled history from being a life settlement
broker. The language of this proposed amendment is similar
to that governing viatical brokers as set forth in Section
10113.1 (a) (2), although viatical brokers are also required
to hold a specific license as a viatical broker. Staff's
proposed amendment would not result in a separate license
being required of life settlement brokers.
d. Adopt the DOI's recommended definition of catastrophic or
life threatening illness or condition to conform to the DOI's
current interpretation of this key term, as well as to
account for diseases with evolving treatment possibilities
(such as AIDS or some forms of cancer):
Section 10113.1(a) (3) should be amended to provide the
AB 243 (Vargas), PageO
following definition of "catastrophic or life threatening:"
(a) an illness or condition that can reasonably be
expected to result in death in twenty four (24) months or
less;
(b) a medical condition that has required or requires
extraordinary medical intervention, such as a major organ
transplant or continuous artificial life support, without
which the insured person would die;
(c) any condition that usually requires continuous
confinement in a nursing home, convalescent center or other
care facility, if the insured person is expected to remain
there for the rest of his or her life;
(d) a medical condition that in the absence of extensive
or extraordinary medical treatment will result in a
dramatically limited life span. Such medical conditions
include but are not limited to the following:
(i) coronary artery disease resulting in an
acute infarction or requiring surgery
(ii) permanent neurological deficit resulting in
acute form of cerebral vascular incident
(iii) end-stage renal failure; or
(iv) Acquired Immune Deficiency Syndrome.
e. The bill should be amended to require that a life
settlement broker disclose the names of all providers to
which a policy was submitted and the offers made, if any, by
each provider. This is consistent with the definition of a
life settlement broker that specifically states that the
broker operates in the interests of the seller (see page 7 at
line 34). The person operating in the interests of the
seller should disclose what are, in effect, all bids for the
seller's property.
f. The term "financing entity" appears several times in the
bill. It is defined on page 5 starting at line 13. The DOI
indicated misgivings about whether there would be adequate
regulation of these entities. The author should identify
which body of law governs each of the types of financing
entities described on page 5 at line 13 so that committee
members can ask the question, "Would that body of law
adequately protect an investor in this financing entity who
hopes to be involved in life settlements?" If the answer is
"no" then staff recommends that the committee eliminate the
named financing entity from the bill.
8. Prior Legislation .
AB 243 (Vargas), PageP
SB 2281, Chapter 1418, Statutes of 1990: Established the law
governing viatical settlements.
SB 1837, Chapter 705, Statutes of 2000, Figueroa: Created
exemption for specified types of viatical and life settlements
from securities law and placed these transactions under
provisions of the insurance code.
AB 226, Chapter 328, Statutes of 2003 (Vargas): Prohibited the
sale of "corporate owned" (a.k.a. "janitor policies"), as
specified, in which companies purchased life insurance policies
on a broad number of employees and didn't tell them that the
policies existed, yet reaped the financial rewards if employees
died.
POSITIONS
Support
Coventry First (sponsor)
Neutral
The Association of Life & Health Insurance Companies
Neutral if amended
Department of Insurance
Oppose
Carol Fiedler, Viatical Settlements Broker, Corte Madera
No position
California Department of Corporations
Consultant: Brian Perkins 916-651-4102