Relates to licensure of life settlement providers; repealer

Summary of provisions

Section 1 of the bill amends §7803(c)(2)(F) to clarify the authority of the Superintendent to require applicants for a life settlement provider license to submit any information the Superintendent requires, provided such information will be "to verify that the applicant qualifies as a life settlement provider and determine compliance with any applicable state law," This amendment conforms with the Superintendent's authority to require information for applicants for a life settlement intermediary registration, pursuant to §7804(d)(1). This section also adds a new paragraph (G) to establish that the Superintendent shall not require an applicant to provide any individual transaction data regarding the business of life settlements, consistent with the limitation of such a requirement for licensees.

Section 2 of the bill amends §7807(a)(1) to clarify that the annual statement required to be submitted by licensed life settlement providers shall include only statutorily mandated information and that the information shall not include individual transaction data regarding the business of life settlements,

Section 3 of the bill deletes §7811(a)(13) and renumbers the subsequent subdivisions accordingly to eliminate the provision that requires a life settlement provider to disclose to the seller of a policy "any affiliations or contractual arrangements with any other life settlement provider, life settlement broker, life settlement intermediary or party financing the transaction".

Section 4 of the bill deletes §7811(c)(3) and renumbers the subsequent subdivisions accordingly to eliminate the provision that requires a life settlement broker to disclose to the seller "any affiliations or contractual arrangements with any life settlement provider, other life settlement broker, life settlement intermediary or any financing entity."

Section 5 of the bill makes a conforming amendment to §7814(a)(6).

Section 6 of the bill amends §7819(a) and (c)(2) to clarify that the provisions of Article 78 shall apply to any life settlement contract

entered into with an owner whose principal residence is in this state, or with a bust that is sited in New York.

Section 7 of the bill sets forth the effective date of the law.

Existing law

Article 78 of the Insurance Law, The New York Life Settlement Act, was enacted pursuant to Chapter 499 of the Laws of 2009, to regulate the modern life settlement market in New York State.

Justification

Since article 78 was enacted in 2009, concerns have been raised regarding the application of various provisions of the law. First, there is a concern about the State Insurance Department's (SID) requirement that applicants for a life settlement provider license submit individual transaction data, individual transaction data on non-New York transactions and an applicant's past revenues received from matured policies. As such, the bill places reasonable limitations on the extent to which the department can require the disclosure of individual transaction data from an application for a life settlement provider license.

Additional concerns have been raised regarding SID's interpretation of § 7811(c)(3) to require that a broker must disclose any and all affiliations with providers, brokers, intermediaries or financing entities even though such person or entity is not involved in the life settlement transaction and even though such person or entity is not licensed or registered in New York. Similarly, SID also applied the same conclusion with respect to § 7811(a)(13), as the "Required Disclosures to Policy Owner" form issued by SID requires that a life settlement provider provide the seller "about any affiliations or contractual arrangements with any other life settlement provider, life settlement broker, life settlement intermediary or party financing the transaction."

SID partially modified this position in OGC Op. No. 11-02-07, with respect to disclosures by life settlement providers, stating that "Insurance Law § 7811(a)(13) is not intended to require a life settlement provider to disclose to a life insurance policy owner every agreement that the provider has with unaffiliated life settlement brokers" but only "when the agreements have the same boiler-plate language governing the manner in which the provider and the broker will conduct business if the provider agrees to pursue a life settlement application submitted by the life settlement broker, and the life settlement brokers are not actually engaged in the life settlement transaction."

However, this new SID OGC Opinion does not address disclosures by brokers, disclosure of "affiliations", or disclosures of a provider's contractual relationships or affiliations with financing entities. There are still concerns that this will result in brokers and providers inundating sellers with several hundred names of parties that the broker or provider has relationships throughout the United States and the world that have no relationship, no involvement with or even knowledge of the life settlement transaction involving that owner. This may result in additional and unnecessary confusion for the owner of the policy.

Further, consumers are already receiving comprehensive information related to the settlement transaction, including specific information about relationships between the broker and provider and other persons or entities directly involved in the settlement transaction, Specifically, § 7811(a)(8) requires that the seller be advised of "the name of each life settlement broker, life settlement intermediary, insurance producer or insurance consultant that will be compensated by the life settlement provider, or any affiliate, parent corporation, or subsidiary of the life settlement provider; and the amount of compensation that the life settlement provider, or any affiliate, parent corporation or subsidiary of the life settlement provider, shall provide to a life settlement broker, life settlement intermediary, insurance producer or insurance consultant, or any affiliate, parent corporation or subsidiary of such broker, intermediary, producer, or consultant, pursuant to the life settlement contract."

Also, § 7811(c)(4) has a similar requirement that the broker disclose "the amount of compensation to be paid to the life settlement broker pursuant to the life settlement contract, and the name of such life settlement broker." Section 7811(a)(12) requires the policy owner be advised of "any affiliations or contractual arrangements between the life settlement provider and the issuer of the policy to be settled." Other provisions ensure that the seller be advised of the contact information of the escrow agent, the broker and provider. Furthermore, in addition to the many provisions in the Act which protect sellers against self-dealing or fraud, § 7814(a) establishes numerous prohibited practices that ensure the transparency to the seller about relationships of brokers and provider that are relevant to the settlement transaction.

Finally, it should be noted that the new opinion creates a fair amount of uncertainty for brokers and providers as there is no definition or understanding as to what is a "boiler-plate agreement", or the condition that such agreements govern the "maimer in which the provider will conduct business if the provider agrees to purse a life settlement application submitted by the life settlement broker, and the life settlement brokers are not actually engaged in the life settlement transaction."

An additional concern pertains to the current §7919 of the New York Life Settlement Act, which provides that New York law applies in any instance where the settlement is proposed to be made or where the owner has a residence in New York. In other words, New York law currently governs in situations where there is a conflict of law. This legislation clarifies that New York law applies only where the contract is entered into with an owner whose principal residence is in New York. The legislation further clarifies that, with respect to a trust, New York law will apply only where the owner of a policy is a New York-based trust.

Legislative history

New bill.

Fiscal implications

None.

Effective date

Immediately.