40-5002. Same; definitions.
40-5002
40-5002. Same; definitions.As used in this act, the following words and phrases shallhave the meanings ascribed to them in this section:
(a) "Advertising" means any written, electronic or printed communication orany communication by means of recorded telephone messages or transmitted onradio, television, the internet or similar communications media, including filmstrips, motion pictures and videos, published, disseminated, circulated orplaced before the public, directly or indirectly, for the purpose of creatingan interest in or inducing a person to sell a life insurance policy pursuant toa viatical settlement contract.
(b) "Business of viatical settlements" means an activity involved in, butnot limited to, offering, soliciting, negotiating, procuring, effectuation,purchasing, investing, financing, monitoring, tracking, underwriting, selling,transferring, assigning, pledging or hypothecating any viatical settlementcontract.
(c) "Chronically ill" means:
(1) Being unable to perform at least two activities of daily living includingeating, toileting, transferring, bathing, dressing, continence or such otheractivity as determined by rules and regulations adopted by the commissioner; or
(2) requiring substantial supervision to protect the individual from threatsto health and safety due to severe cognitive impairment.
(d) "Commissioner" means the commissioner of insurance.
(e) "Financing entity" means any underwriter, placement agent, lender,purchaser of securities, purchaser of a policy or certificate from a viaticalsettlement provider, credit enhancer or any entity that has a direct ownershipin a policy or certificate which is the subject of a viatical settlementcontract, but:
(1) Whose principal activity related to the transaction is providing funds toeffect the viatical settlement or purchase of one or more viaticated policies;and
(2) who has an agreement in writing with one or more licensed viaticalsettlement providers to finance the acquisition of viatical settlementcontracts.
Financing entity shall not include any nonaccredited investor or viaticalsettlement purchaser.
(f) "Fraudulent viatical settlement act" means and includes:
(1) Any act or omission committed by any person who, knowingly or with intentto defraud, for the purpose of depriving another of property or for pecuniarygain, commits, or permits such person's employees or agents to engage in actsincluding:
(A) Presenting, causing to be presented or preparing with knowledge or beliefthat it will be presented to or by a viatical settlement provider, viaticalsettlement broker, viatical settlement purchaser, financing entity, insurer,insurance producer or any other person, false material information, orconcealing material information, as part of, in support of or concerning a factmaterial to one or more of the following:
(i) An application for the issuance of a viatical settlement contract orinsurance policy;
(ii) the underwriting of a viatical settlement contract or insurance policy;
(iii) a claim for payment or benefit pursuant to a viatical settlementcontract or insurance policy;
(iv) premiums paid on an insurance policy;
(v) payments and changes in ownership or beneficiary made in accordance withthe terms of a viatical settlement contract or insurance policy;
(vi) the reinstatement or conversion of an insurance policy;
(vii) in the solicitation, offer, effectuation or sale of a viaticalsettlement contract or insurance policy;
(viii) the issuance of written evidence of viatical settlement contractor insurance; or
(ix) a financing transaction.
(B) Employing any device, scheme or artifice to defraud related toviaticated policies;
(2) any act done or committed in the furtherance of a fraud or to prevent thedetection of a fraud any person commits or permits its employees or its agentsto:
(A) Remove, conceal, alter, destroy or sequester from the commissioner theassets or records of a licensee or other person engaged in the business ofviatical settlements;
(B) misrepresent or conceal the financial condition of a licensee, financingentity, insurer or other person;
(C) transact the business of viatical settlements in violation of lawsrequiring a license, certificate of authority or other legal authority for thetransaction of the business of viatical settlements; or
(D) file with the commissioner or the chief insurance regulatory official ofanother jurisdiction a document containing false information or otherwiseconceals information about a material fact from the commissioner;
(3) commit embezzlement, theft, misappropriation or conversion ofmoneys, funds,premiums, credits or other property of a viatical settlement provider, insurer,insured, viator, insurance policy owner or any other person engaged in thebusiness of viatical settlements or insurance; or
(4) recklessly enterinto, broker or otherwise deal in a viaticalsettlement contract, the subject of which is a life insurance policy that wasobtained by presenting false information concerning any fact material to thepolicy or by concealing, for the purpose of misleading another, informationconcerning any fact material to the policy, where the viator or the viator'sagent intended to defraud the policy's issuer. "Recklessly" means engaging inthe conduct in conscious and clearly unjustifiable disregard of a substantiallikelihood of the existence of the relevant facts or risks, such disregardinvolving a gross deviation from acceptable standards of conduct;
(5) stranger-originated life insurance; or
(6) attempt to commit, assist, aid or abet in the commission of,orconspiracy tocommit any act oromission specified in this subsection; or
(7) fail to disclose to the insurer when requested by the insurer that theprospective insured hasundergone a life expectancy evaluation by any person or entity other than theinsurer or anyauthorized representative of such insurer in connection with the issuance ofthe policy.
(g) "NAIC" means the national association of insurance commissioners.
(h) "Person" means a natural person or a legal entity, including, but notlimited to, an individual, partnership, limited liability company, association,trust or corporation.
(i) "Policy" means an individual or group policy, group certificate, contractor arrangement of life insurance affecting the rights of a resident of thisstate or bearing a reasonable relation to this state, regardless of whetherdelivered or issued for delivery in this state.
(j) "Related provider trust" means a titling trust or other trust establishedby a licensed viatical settlement provider or a financing entity for the solepurpose of holding the ownership or beneficial interest in purchased policiesin connection with a financing transaction. The trust shall have a writtenagreement with the licensed viatical settlement provider under which thelicensed viatical settlement provider is responsible for ensuring compliancewith all statutory and regulatory requirements and under which the trust agreesto make all records and files related to viatical settlement transactionsavailable to the commissioner as if those records and files were maintaineddirectly by the licensed viatical settlement provider.
(k) "Special purpose entity" means any corporation, partnership, trust,limited liability company or other similar entity formed solely to provide,either directly or indirectly, access to institutional capital markets for afinancing entity or licensed viatical settlement provider.
(l) "Stranger-originated life insurance" means an act, practice orarrangement toinitiatealife insurance policyfor the benefit of a third party investor who, at the time of policyorigination, has no insurableinterest in the insured under K.S.A. 40-450 and amendments thereto.Stranger-originated lifeinsurance practices include, but are not limited to, cases in which lifeinsurance is purchased withresources or guarantees from or through a person or entity who, at the time ofpolicy inception,could not lawfully initiate the policy, and where, at the time of policyinception, there is anarrangement or agreement to directly or indirectlytransfer theownership of the policy or the policy benefits, or both, to a third party. Anytrust that is created togive the appearance of insurable interest, and is used to initiate one or morepolicies forinvestors, violates K.S.A. 40-450, and amendments thereto, and the prohibitionagainst wageringon human life. Stranger-originated life insurance arrangements do not includethose practices setforth in paragraph (3) of subsection (o).
(m) "Terminally ill" means having an illness or sickness that canreasonablybe expected to result in death in 24 months or less.
(n) "Viatical settlement broker" means a person that onbehalf of a viatorand for a fee, commission or other valuable consideration offers or attempts tonegotiate viatical settlement contracts between a viator and one or moreviatical settlement providers. Notwithstanding the manner in which the viaticalsettlement broker is compensated, a viatical settlement broker is deemed torepresent only the viator and owes a fiduciary duty to the viator to actaccording to the viator's instructions and in the best interest of the viator.The term does not include an attorney, certified public accountant or afinancial planner accredited by a nationally recognized accreditation agency,who is retained to represent the viator and whose compensation is not paiddirectly or indirectly by the viatical settlement provider or purchaser.
(o) (1) "Viatical settlement contract" means a writtenagreement between a viator and aviaticalsettlement provider establishing the termsunder which compensation or anything of value is or will bepaid, whichcompensation or value is less than the expected death benefits of the policy,in return for theviator's presentor future assignment, transfer, sale, devise or bequest of thedeath benefit orownership of any portion of the insurance policy or certificate of insurance,except that theminimum value for a viatical settlement contract shall be greater than the cashsurrender value oraccelerated death benefit available at the time of an application for aviaticalsettlement contract.
(2) Viatical settlement contract also includes:
(A) The transfer for compensation or value of ownership or beneficialinterest in atrust or other entity that owns such policy if the trust or other entity wasformed oravailed of for the principal purpose of acquiring one or more life insurancecontracts, which life insurance contract insures the life of a person residingin thisstate.
(B) A written agreement for a loan or other lending transaction,secured primarilyby an individual or group life insurance policy, or a premium finance loan madefor a policy on or before the date of issuance of the policy, where:
(i) The viator receives on the date of the premiumfinance loan a guarantee of a future viatical settlementvalue of the policy;or
(ii) the viator agrees on the date of the premium finance loan to sell thepolicy or any portion of its death benefit on any date following theissuance of the policy.
(3) Viatical settlement contract does not include:
(A) A policy loan by a life insurance company pursuant to the termsof the lifeinsurance policy or accelerated death provisions contained in the lifeinsurancepolicy, whether issued with the original policy or as a rider.
(B) Loan proceeds that are used solely to pay:
(i) Premiums for the policy; and
(ii) any costs or expenses incurred by the lender or the borrower inconnection with the financing.
(C) A premium finance loan or any loan made by a bank or otherlicensedfinancial institution, provided that neither default on such loan nor thetransfer ofthe policy in connection with such default is pursuant to an agreement orunderstanding with any other person for the purpose of evading regulation underthis act.
(D) A collateral assignment of a life insurance policy by a viator.
(E) A loan made by a lender that does not violate the Kansasinsurance premiumfinance company act, K.S.A. 40-2601 et seq., and acts amendatory thereof orsupplemental thereto, unless the premium financeloan is described in subparagraph (B) of paragraph (2).
(F) An agreement where all the parties:
(i) Are closely related to the insured by blood or law; or
(ii) have a lawful substantial economic interest in thecontinued life, healthand bodily safety of the person insured, or are trusts established primarilyfor the benefit of such parties;
(G) any designation, consent or agreement by an insured who is anemployee of anemployer in connection with the purchase by the employer, or trust establishedbythe employer, of life insurance on the life of the employee;
(H) a bona fide business succession planning arrangement between oneor more:
(i) Shareholders in a corporation or between a corporation and one or moreof its shareholders or one or more trusts established by its shareholders;
(ii) partners in a partnership or between a partnership andone or more ofits partners or one or more trusts established by its partners; or
(iii) members in a limited liability company or between alimited liabilitycompany and one or more of its members or one or more trusts establishedby its members;
(I) an agreement entered into by a service recipient, or a trustestablished by theservice recipient, and a service provider, or a trust established by theserviceprovider, who performs significant services for the service recipient's tradeorbusiness; or
(J) any other contract, transaction or arrangement exempted from thedefinition ofviatical settlement contract by the commissioner based on a determination thatthecontract, transaction or arrangement is not of the type intended to beregulated bythis act.
(p) "Viatical settlement provider" means a person, otherthan a viator, whoenters into or effectuates a viatical settlement contract. Viatical settlementprovider does not include:
(1) A bank, savings bank, savings and loan association, credit union or otherlicensed lending institution that takes an assignment of a life insurancepolicy as collateral for a loan;
(2) the issuer of a life insurance policy providing accelerated benefitsunder K.S.A. 40-401, and amendments thereto, and pursuant to the contract;
(3) an authorized or eligible insurer that provides stop loss coverage to aviatical settlement provider, purchaser, financing entity, special purposeentity or related provider trust;
(4) a natural person who enters into or effectuates no more than oneagreement in a calendar year for the transfer of life insurance policies forany value less than the expected death benefit;
(5) a financing entity;
(6) a special purpose entity;
(7) a related provider trust;
(8) a viatical settlement purchaser; or
(9) an accredited investor or qualified institutional buyer as such termis defined respectively in regulation D, rule 501 or rule 144A of the federalsecurities act of 1933, as in effect upon the effective date of this act, andwho purchases a viaticated policy from a viatical settlement provider.
(q) "Viator" means the owner of a life insurance policy ora certificateholder under a group policy who enters or seeks to enter into a viaticalsettlement contract. For the purposes of this act, a viator shall not belimited to an owner of a life insurance policy or a certificate holder under agroup policy insuring the life of an individual with a terminal or chronicillness or condition except where specifically addressed. Viator shall notinclude:
(1) A licensee under this act;
(2) a qualified institutional buyeras such term isdefined in rule 144A ofthefederalsecurities act of 1933, as in effect upon the effective date of this act;
(3) a financing entity;
(4) a special purpose entity; or
(5) a related provider trust.
(r) "Viaticated policy" means a life insurance policy orcertificate that hasbeen acquired by a viatical settlement provider pursuant to a viaticalsettlement contract.
(s) "Viatical settlement purchaser" means a person whogives a sum of moneyas consideration for a life insurance policy or an interest in the deathbenefits of a life insurance policy, or a person who owns or acquires or isentitled to a beneficial interest in a trust that owns a viatical settlementcontract or is the beneficiary of a life insurance policy that has been or willbe the subject of a viatical settlement contract, for the purpose of derivingan economic benefit. Viatical settlement purchaser shall not include:
(1) A licensee under this act;
(2) an accredited investor or qualified institutional buyer as such term isdefined respectively in regulation D, rule 501 or rule 144A of the federalsecurities act of 1933, as in effect upon the effective date of this act;
(3) a financing entity;
(4) a special purpose entity; or
(5) a related provider trust.
History: L. 2002, ch. 158, § 2;L. 2008, ch. 96, § 5; July 1.