§ 23-81-802 - Definitions.
23-81-802. Definitions.
As used in this subchapter:
(1) "Advertisement" means any written, electronic, or printed communication or any communication by means of recorded telephone messages or transmissions on radio, television, the Internet, or similar communications media, including film strips, motion pictures, and videos, published, disseminated, circulated, or placed before the public, directly or indirectly, to create an interest in or to induce a person to purchase or sell, assign, devise, bequest, or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract;
(2) (A) "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.
(B) A broker 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.
(C) "Broker" does not include an attorney, certified public accountant, or financial planner retained in the type of practice customarily performed in his or her professional capacity to represent the owner whose compensation is not paid directly or indirectly by the provider or any other person except the owner;
(3) "Business of life settlements" means an activity involved in, but not limited to, offering to enter into, soliciting, negotiating, procuring, effectuating, monitoring, or tracking life settlement contracts;
(4) "Chronically ill" means:
(A) Being unable to perform at least two (2) activities of daily living such as eating, toileting, transferring, bathing, dressing, or continence;
(B) Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or
(C) Having a level of disability similar to that described in subdivision (4)(A) of this section as determined by regulations of the United States Secretary of Health and Human Services if adopted by rule of the Insurance Commissioner;
(5) (A) "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:
(i) Whose principal activity related to the transaction is providing funds to effect the life settlement contract or purchase of one (1) or more policies; and
(ii) Has an agreement in writing with one (1) or more providers to finance the acquisition of life settlement contracts.
(B) "Financing entity" does not include a nonaccredited investor or purchaser;
(6) "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 either is registered or exempt from registration under federal and state securities law;
(7) "Fraudulent life settlement act" includes:
(A) Acts or omissions committed by a person who knowingly and with intent to defraud for the purpose of depriving another of property or for pecuniary gain commits or permits its employees or its agents to engage in acts, including without limitation:
(i) Presenting, causing to be presented, or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, broker, insurer, insurance producer, or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one (1) or more of the following:
(a) An application for the issuance of a life settlement contract or insurance policy;
(b) The underwriting of a life settlement contract or insurance policy;
(c) A claim for payment or benefit pursuant to a life settlement contract or insurance policy;
(d) Premiums paid on an insurance policy;
(e) Payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or insurance policy;
(f) The reinstatement or conversion of an insurance policy;
(g) The solicitation, offer to enter into, or effectuation of a life settlement contract or insurance policy;
(h) The issuance of written evidence of life settlement contracts or insurance;
(i) Any application for or the existence of or any payments related to a loan secured directly or indirectly by any interest in a life insurance policy; or
(j) Entering into any practice or plan that involves stranger-originated life insurance;
(ii) Failing to disclose to the insurer when the request for such disclosure has been asked for by the insurer that the prospective insured has undergone a life expectancy evaluation by any person or entity other than the insurer or its authorized representatives in connection with the issuance of the policy;
(iii) Employing any device, scheme, or artifice to defraud in the business of life settlements; or
(iv) In the solicitation, application, or issuance of a life insurance policy, employing any device, scheme, or artifice in violation of state insurable interest laws; and
(B) In the furtherance of a fraud or to prevent the detection of a fraud, any person commits or permits its employees or its agents to:
(i) Remove, conceal, alter, destroy, or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements;
(ii) Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person;
(iii) Transact the business of life settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life settlements;
(iv) File with the commissioner or the chief insurance regulatory official of another jurisdiction a document containing false information or otherwise concealing information about a material fact from the commissioner;
(v) Engage in embezzlement, theft, misappropriation, or conversion of moneys, funds, premiums, credits, or other property of a provider, insurer, insured, owner, insurance, policy owner, or any other person engaged in the business of life settlements or insurance;
(vi) Knowingly and with intent to defraud, enter into, broker, or otherwise deal in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing for the purpose of misleading another information concerning any fact material to the policy, when the owner or the owner's agent intended to defraud the policy's issuer;
(vii) Attempt to commit, assist, aid, or abet in the commission of or conspiracy to commit the acts or omissions specified in this subdivision (7); or
(viii) Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this subchapter for the purpose of evading or avoiding the provisions of this subchapter;
(8) "Insured" means the person covered under the policy being considered for sale in a life settlement contract;
(9) "Life expectancy" means the arithmetic mean of the number of months the insured under the life insurance policy to be settled can be expected to live considering medical records and appropriate experiential data;
(10) "Life insurance producer" means any person licensed in this state as a resident or nonresident insurance producer who has received qualification or authority for life insurance coverage or a life line of coverage pursuant to 23-64-507(a)(1);
(11) (A) "Life settlement contract" means a written agreement entered into between a provider and an owner, establishing the terms under which compensation or anything of value will be paid, which compensation or thing of value is less than the expected death benefit of the insurance policy or certificate, in return for the owner's assignment, transfer, sale, devise, or bequest of the death benefit or any portion of an insurance policy or certificate of insurance for compensation, provided, however, that the minimum value for a life settlement contract shall be greater than a cash surrender value or accelerated death benefit available at the time of an application for a life settlement contract.
(B) "Life settlement contract" also includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns such policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one (1) or more life insurance contracts, which life insurance contract insures the life of a person residing in this state.
(C) "Life settlement contract" also includes a premium finance loan made for a policy on or before the date of issuance of the policy when:
(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.
(D) "Life settlement contract" does not include:
(i) A policy loan by a life insurance company pursuant to the terms of the life insurance policy or accelerated death provisions contained in the life insurance policy, whether issued with the original policy or as a rider;
(ii) A premium finance loan, as defined herein, or any loan made by a bank or other licensed financial institution, provided that neither default on the loan nor the transfer of the policy in connection with the default is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this subchapter;
(iii) A collateral assignment of a life insurance policy by an owner;
(iv) An agreement in which 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;
(v) 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;
(vi) A bona fide business succession planning arrangement:
(a) Between one (1) or more shareholders in a corporation or between a corporation and one (1) or more of its shareholders or one (1) or more trusts established by its shareholders;
(b) Between one (1) or more partners in a partnership or between a partnership and one (1) or more of its partners or one (1) or more trusts established by its partners; or
(c) Between one (1) or more members in a limited liability company or between a limited liability company and one (1) or more of its members or one (1) or more trusts established by its members; or
(vii) 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;
(12) "Net death benefit" means the amount of the life insurance policy or certificate to be settled less any outstanding debts or liens;
(13) (A) "Owner" means the owner of a life insurance 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.
(B) "Owner" is not limited to an owner of a life insurance 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 when specifically addressed.
(C) "Owner" does not include:
(i) Any provider or other licensee under this subchapter;
(ii) A qualified institutional buyer as defined in Rule 144A of the Federal Securities Act of 1933, as amended;
(iii) A financing entity;
(iv) A special purpose entity; or
(v) A related provider trust;
(14) "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;
(15) "Person" means any natural person or legal entity, including without limitation a partnership, limited liability company, association, trust, or corporation;
(16) "Policy" means an individual or group policy, group 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;
(17) "Premium finance loan" means a loan made primarily for the purposes of making premium payments on a life insurance policy, which loan is secured by an interest in such life insurance policy;
(18) (A) "Provider" means a person other than an owner who enters into or effectuates a life settlement contract with an owner.
(B) "Provider" does not include:
(i) Any bank, savings bank, savings and loan association, or credit union;
(ii) A licensed lending institution or creditor or secured party pursuant to a premium finance loan agreement which takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy as collateral for a loan;
(iii) The insurer of a life insurance policy or rider to the extent it provides accelerated death benefits or cash surrender value under the insurance code or rules of the commissioner;
(iv) Any natural person who enters into or effectuates no more than one (1) agreement in a calendar year for the transfer of a life insurance policy or certificate issued pursuant to a group life insurance policy for compensation or anything of value less than the expected death benefit payable under the policy;
(v) A purchaser;
(vi) Any authorized or eligible insurer that provides stop loss coverage to a provider, purchaser, financing entity, special purpose entity, or related provider trust;
(vii) A financing entity;
(viii) A special purpose entity;
(ix) A related provider trust;
(x) A broker; or
(xi) An accredited investor or qualified institutional buyer as defined in, respectively, Regulation D, Rule 501 or Rule 144A of the Federal Securities Act of 1933, as amended, who purchases a life settlement policy from a provider;
(19) "Purchased policy" means a policy or group certificate that has been acquired by a provider pursuant to a life settlement contract;
(20) "Purchaser" means a person who pays compensation or anything of value as consideration for a beneficial interest in a trust which is vested with, or for the assignment, transfer, or sale of, an ownership or other interest in a life insurance policy or a certificate issued pursuant to a group life insurance policy which has been the subject of a life settlement contract;
(21) (A) "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.
(B) In order to qualify as a related provider trust, the trust must have 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 State Insurance Department as if those records and files were maintained directly by the licensed provider;
(22) "Settled policy" means a life insurance policy or certificate that has been acquired by a provider pursuant to a life settlement contract;
(23) "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:
(A) For a financing entity or provider; or
(B) In connection with a transaction in which:
(i) The securities in the special purpose entity are acquired by the owner or by a qualified institutional buyer, as defined in Rule 144A as promulgated under the Federal Securities Act of 1933, as amended; or
(ii) The securities pay a fixed rate of return commensurate with established asset-backed institutional capital markets;
(24) (A) "Stranger-originated life insurance" is a practice or plan to initiate a life insurance policy for the benefit of a third-party investor who at the time of policy origination has no insurable interest in the insured.
(B) Stranger-originated life insurance practices include without limitation cases in which life insurance is purchased with resources or guarantees from or through a person or entity that at the time of policy inception could not lawfully initiate the policy himself, herself, or itself, and in which 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 the policy and the policy benefits to a third party.
(C) Trusts that are created to give the appearance of insurable interest and are used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life.
(D) Stranger-originated life insurance arrangements do not include those practices set forth in subdivision (11)(D) of this section; and
(25) "Terminally ill" means having an illness or sickness that can reasonably be expected to result in death in twenty-four (24) months or less.