New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on March 1, 2002, representing the position of the New York State Insurance Department.

Re: Life Settlements, Licensing Requirements

Issues:

1. Are life settlements, which the inquirer defines as the sale of a life insurance policy by an insured who has a life expectancy in excess of two years, permitted in New York?

2. What are the licensing requirements?

3. What statutes and regulations govern these transactions?

Conclusions:

1. Life settlements are permitted in New York

2. If any of the policies that may be purchased from a New York resident is from a viator, as that term is defined in New York Insurance Law § 7801(b)(McKinney 2000), the purchaser would have to be licensed as a viatical settlement company. In addition, the intermediary, if any, which produces such policy would have to be licensed as a viatical settlement broker, unless the exemption in New York Insurance Law § 7801(d) is applicable

3. If any of the policies that may be purchased from a New York resident is from a viator, as that term is defined in New York Insurance Law § 7801(b)(McKinney 2000), the transaction would be governed by New York Insurance Law Article 78 and N.Y. Comp. R. & Regs. tit. 11, Part 380 (1994) (Regulation 148).

Facts:

The inquirer is presently licensed as a life insurance agent pursuant to New York Insurance Law § 2103(a) (McKinney 2000) and inquires as to the legality of life settlements in New York.

Analysis:

New York Insurance Law § 7801(a) defines a viatical settlement company:

‘Viatical settlement company’ means an individual, partnership, corporation or other entity not prohibited from acting as a viatical settlement company . . . that enters into an agreement with a person owning a life insurance policy insuring the life of a person who has a catastrophic or life threatening illness or condition, under the terms of which the viatical settlement company pays compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy, in return for the policyowner's assignment, transfer, sale, devise or bequest of the death benefit or ownership of the insurance policy to the viatical settlement company. . . .

New York Insurance Law § 7801(b) defines a viator:

‘Viator’ means the owner of a life insurance policy insuring the life of a person who has a catastrophic or life threatening illness or condition, who enters into an agreement under which the viatical settlement company will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy, in return for the viator's assignment, transfer, sale, devise or bequest of the death benefit or ownership of the insurance policy to the viatical settlement company. . . .

New York Insurance Law § 7802(a) (McKinney 2000) sets forth the applicable licensing requirements:

No individual, partnership, corporation or other entity may act as a viatical settlement company or broker or enter into or solicit a viatical settlement without first having obtained a license from the superintendent, in accordance with procedures established by regulation.

Accordingly, based upon the above quoted statutes, if any of the policies that may be purchased from a New York resident is from a viator, as that term is defined in New York Insurance Law § 7801(b), the purchaser would have to be licensed as a viatical settlement company.

New York Insurance Law § 7801(d) defines a viatical settlement broker:

‘Viatical settlement broker’ means an individual, partnership, corporation or other entity who or which for another and for a fee, commission, or other valuable consideration, offers or advertises the availability of viatical settlements, introduces viators to viatical settlement companies, or offers or attempts to negotiate viatical settlements between a viator and one or more viatical settlement companies. ‘Viatical settlement broker’ does not include an attorney, accountant or a person acting under a power of attorney from the viator, retained to represent the viator whose compensation is paid solely by the viator and without regard to whether a viatical settlement is effected.

The intermediary, if any, which produces such policy for the purchaser would have to be licensed as a viatical settlement broker, unless the exemption in New York Insurance Law § 7801(d) is applicable. A license as an insurance agent pursuant to New York Insurance Law § 2103 or as an insurance broker pursuant to New York Insurance Law § 2104 (McKinney 2000) would not be sufficient to act as an intermediary for the purchase of a policy of a viator.

New York Insurance Law Article 78 and N. Y. Comp. R. & Regs. tit. 11, Part 380 regulate the viatical settlement business in New York. If the seller of the policy is not a viator, as that term is defined in New York Insurance Law §7801(b), then the above cited statute and regulation are not applicable and the transaction would not be regulated by this Department.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.