Florida Deputy Insurance Commissioner Testifies about Life Settlements before U.S. Senate Special Committee on Aging
TALLAHASSEE, Fla. – Florida Deputy Insurance Commissioner for Life and Health Mary Beth Senkewicz testified Wednesday in Washington, D.C., before the U.S. Senate Special Committee on Aging on the subject of life settlements in the insurance industry.
The hearing was entitled “Betting on Death in the Life Settlement Market - What's at Stake for Seniors?” The Committee is chaired by Sen. Herb Kohl, D-WI.
A life settlement is a financial arrangement in which a person sells their life insurance policy to investors, who continue to pay the policy premiums and collect the payout upon the seller’s death. According to the Committee, there has been extensive growth of the life settlement market – doubling in value since 2006 to a worth of $12 billion. The industry is expected to exceed $160 billion within a few decades.
Commissioner Kevin McCarty held a public hearing August 28 on the potential dangers of Stranger-Originated Life Insurance (STOLI) arrangements. STOLIs are similar to life settlements, but they lack the required insurable interest at the time the arrangement is established and can have severe negative consequences for person’s who enter into them. The Office of Insurance Regulation has a special section of detailed material
on its Web site (www.floir.com
), highlighting its concerns about STOLI arrangements.
“We have to do everything we can to protect seniors and make sure they fully understand the life insurance products that are offered to them,” said Commissioner McCarty. “STOLI arrangements may be an attempt to circumvent state insurable interest laws that are intended to prevent life insurance from being used to wager on human life.”
Deputy Commissioner Senkewicz’s testimony focused on the need for more transparency in the life settlements industry to enable regulators to better protect seniors from unexpected tax consequences as well as to ensure that seniors fully understand that to complete a life settlement transaction they must disclose confidential medical information to industry investors.
A complete copy of Deputy Commissioner Senkewicz’s testimony
is available on the Office Web site.
Others invited by the Committee to testify included:
- Stephan Leimberg, CEO, Leimberg Information Services Inc., Havertown, PA.
- Michael McRaith, Director, Division of Insurance, Illinois Department of Financial and Professional Regulation, Chicago.
- Fred Joseph, Commissioner, Division of Securities, Colorado Department of Regulatory Agencies, on behalf of North American Securities Administrators Association (NASAA), Denver.
- James Avery Jr., President, Individual Life for Prudential Financial, on behalf of American Council of Life Insurers (ACLI), Newark, NJ.
- Scott Peden, President, Life Partners Inc., Waco, TX
- Michael Freedman, Senior Vice President, Government Affairs, Coventry First LLC, Fort Washington, PA