FOR IMMEDIATE RELEASE

NAIC WARNS: SECURITIZING LIFE INSURANCE SETTLEMENTS IS RISKY
Regulators Alert to Need for Disclosure and Consumer Protection

WASHINGTON, D.C. (Sept. 24, 2009) — The relatively new phenomenon of securitizing life insurance settlements is drawing scrutiny from state regulators for potential risks to consumers in the financial marketplace, the National Association of Insurance Commissioners (NAIC) told Congress today.

Testifying before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, NAIC Vice President and Iowa Insurance Commissioner Susan Voss cautioned lawmakers about such innovative investment schemes.

“Life insurance settlements are necessary transactions for some consumers, but they require appropriate regulation with a focus on disclosure and consumer protection,” Voss told lawmakers. “This oversight is critical, particularly as stranger owned life insurance, or STOLI, continues to emerge.”

Voss, who also regulates securities in her state, explained that “while such securitization is outside the jurisdiction of insurance regulators, we have concerns that securitization of life insurance settlements will incentivize would-be STOLI investors to attempt to expand the marketplace – much as securitization of mortgages helped dramatically expand that marketplace.”

Voss also raised concerns about the impact of securitization on policies that would otherwise lapse — requiring higher insurance premiums; and about the need to be certain that any securitization of life insurance settlements does not compromise the original policyholder’s rights and privacy.

Click HERE to view the full text of Commissioner Voss’s testimony.

About the NAIC

Formed in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories. The NAIC has three offices: Executive Office, Washington, D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office, New York City. The NAIC serves the needs of consumers and the industry, with an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace. For more information, visit www.naic.org.

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