§431C-2 Definitions. As used in this chapter, unless the content otherwise requires:
"Advertisement" means any written, electronic, or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet, or similar communications media, including film strips, motion pictures, and videos, that is published, disseminated, circulated, or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to purchase or sell, assign, devise, bequest, or transfer the death benefit or ownership of a policy or an interest in a policy pursuant to a life settlement contract.
"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, 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. "Broker" does not include an attorney, certified public accountant, or financial planner retained in the type of practice customarily performed in their professional capacity to represent the owner, whose compensation is not paid directly or indirectly by the provider or any other person, except the owner.
"Business of life settlements" means an activity involved in but not limited to offering to enter into the soliciting, negotiating, procuring, effectuating, monitoring, or tracking of life settlement contracts.
"Certificate" means a certificate issued pursuant to a group policy.
"Chronically ill" means:
(1) Being unable to perform at least two activities of daily living, such as eating, toileting, transferring, bathing, dressing, or continence;
(2) Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or
(3) Having a level of disability similar to that described in paragraph (1) as determined by the United States Secretary of Health and Human Services.
"Commissioner" means the insurance commissioner.
"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:
(1) Whose principal activity related to the transaction is providing funds to effect the life settlement contract or purchase of one or more policies; and
(2) Who has an agreement in writing with one or more providers to finance the acquisition of life settlement contracts.
The term shall not include a non-accredited investor or purchaser.
"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 is either registered or exempt from registration under federal and state securities law.
"Insured" means the person covered under the policy being considered for sale in a life settlement contract.
"Life expectancy" means the arithmetic mean of the number of months the insured under the policy to be settled can be expected to live as determined by a life expectancy company considering medical records and appropriate experiential data.
"Life insurance producer" means any person licensed in this State as a resident or nonresident insurance producer who has received qualification for life insurance pursuant to article 9A of chapter 431.
"Life settlement contract" means:
(a)(1) A written agreement entered into between a provider and an owner, establishing the terms under which compensation or any thing of value will be paid, which compensation or thing of value is less than the expected death benefit of the owner's policy or certificate, in return for the owner's assignment, transfer, sale, devise, or bequest of the death benefit or any portion of the policy or certificate for compensation, where the minimum value of the contract is greater than a cash surrender value or accelerated death benefit available under the policy or certificate at the time of an application for a life settlement contract;
(2) The transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns such policy or certificate if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts, which life insurance contract insures the life of a person residing in this State; or
(3) (A) A written agreement for a loan or other lending transaction, secured primarily by an individual or group policy; or
(B) A premium finance loan made for a policy on or before the date of issuance of the policy where:
(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.
"Life settlement contract" does not include:
(b)(1) A policy loan by a life insurance company pursuant to the terms of the policy or accelerated death provisions contained in the policy, whether issued with the original policy or as a rider;
(2) A premium finance loan, as defined herein, or any loan made by a bank or other licensed financial institution, so long as neither default on such loan nor the transfer of the policy in connection with such default is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this chapter;
(3) A collateral assignment of a policy by an owner;
(4) A loan made by a lender that does not violate any insurance premium finance law of this State; provided that the loan does not qualify as a life settlement contract;
(5) An agreement where 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;
(6) 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;
(7) A bona fide business succession planning arrangement:
(A) Between one or more shareholders in a corporation or between a corporation and one or more of its shareholders or one or more trusts established by its shareholders;
(B) Between one or more partners in a partnership or between a partnership and one or more of its partners or one or more trusts established by its partners; or
(C) Between one or more members in a limited liability company or between a limited liability company and one or more of its members or one or more trusts established by its members;
(8) 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; or
(9) Any other contract, transaction, or arrangement that is a life settlement contract and that the commissioner determines is not of the type intended to be regulated by this chapter.
"Net death benefit" means the amount of the policy or certificate to be settled less any outstanding debts or liens.
"Owner" means the owner of a 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, but shall not be limited to an owner of a 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 where specifically addressed.
"Owner" does not include:
(1) Any provider or other licensee under this chapter;
(2) A qualified institutional buyer as defined in Rule 144A of the Securities Act of 1933, as amended;
(3) A financing entity;
(4) A special purpose entity; or
(5) A related provider trust.
"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.
"Person" means any natural person or legal entity, including but not limited to a partnership, limited liability company, association, trust, or corporation.
"Policy" means an individual or group policy, 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.
"Premium finance loan" means a loan made primarily for the purposes of making premium payments on a policy, which loan is secured by an interest in such policy.
"Provider" means a person, other than an owner, who enters into or effectuates a life settlement contract with an owner. The term does not include:
(1) Any bank, savings bank, savings and loan association, or credit union;
(2) A licensed lending institution or creditor or secured party pursuant to a premium finance loan agreement that takes an assignment of a policy or certificate as collateral for a loan;
(3) The insurer of a policy or rider to the extent of providing accelerated death benefits, riders, or cash surrender value;
(4) Any natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of a policy or certificate for compensation or anything of value less than the expected death benefit payable under the policy;
(5) A purchaser;
(6) Any authorized or eligible insurer that provides stop loss coverage to a provider, purchaser, financing entity, special purpose entity, or related provider trust;
(7) A financing entity;
(8) A special purpose entity;
(9) A related provider trust;
(10) A broker; or
(11) An accredited investor or qualified institutional buyer as defined respectively in Rule 501 of Regulation D and Rule 144A of the Securities Act of 1933, as amended, who purchases a life settlement contract from a provider.
"Purchased policy" means a policy or certificate that has been acquired by a provider pursuant to a life settlement contract.
"Purchaser" means a person who pays compensation or anything of value as consideration for a beneficial interest in a trust that is vested with, or for the assignment, transfer, or sale of, an ownership or other interest in a policy or a certificate that has been the subject of a life settlement contract.
"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, that includes 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 insurance division as if those records and files were maintained directly by the licensed provider.
"Settled policy" means a policy or certificate that has been acquired by a provider pursuant to a life settlement contract.
"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 for a financing entity or provider in connection with a transaction in which the securities in the special purpose entity:
(1) Are acquired by the owner or by a "qualified institutional buyer" as defined in Rule 144A of the Securities Act of 1933, as amended; or
(2) Pay a fixed rate of return commensurate with established asset-backed institutional capital markets.
"Stranger-originated life insurance" means a practice or plan to initiate a policy for the benefit of a third party investor who, at the time of policy origination, has no insurable interest in the insured, and includes:
(1) Arrangements in which life insurance is purchased with resources or guarantees from or through a person or entity who at the time of policy inception, could not lawfully initiate the policy by oneself or itself, and where, 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 both, to a third party; and
(2) Trusts created to give the appearance of insurable interest and used to initiate policies for investors.
"Stranger-originated life insurance" does not include those practices set forth in subsection (b) of the definition of "life settlement contract".
"Terminally ill" means having an illness or sickness that can reasonably be expected to result in death in twenty-four months or less. [L 2012, c 256, pt of §1]