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

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on April 8, 2003, representing the position of the New York State Insurance Department.

Viatical Settlements

Issues

1. Does Company A have to be licensed as a viatical settlement company?

2. Does Company A have to be licensed as a viatical settlement broker?

Conclusion

If Company A will deal in policies insuring viators, as that term is defined in New York Insurance Law § 7801(b) (McKinney 2000), depending on whether the firm will either purchase the policy or facilitate purchase by another entity, it would have to be licensed as either a viatical settlement company or viatical settlement broker. If the insured is not a viator, no licensing by this Department is required.

Facts

The inquirer indicates that Company A:

Plans in the future to involve [itself] in the purchase and sale of Secondary Market Life Insurance products. [Company A] may perform some or all of the following: (1) Solicit the purchase of policies from residents [of New York], (2) Broker the purchase of policies from residents [of New York], (3) Buy policies from residents [of New York]. [Company A is] institutionally funded and [has] no intention to resell these policies in any form to residents [of New York].

Analysis

New York Insurance Law § 7801 provides, in pertinent part:

(a) ‘Viatical settlement company’ means an individual, partnership, corporation or other entity not prohibited from acting as a viatical settlement company under section twenty of the public health law 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. . . .

(b) ‘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. Viator may also include a person insured under a group life insurance policy who is not prohibited from assigning his or her rights or benefits and who assigns those rights or benefits by a viatical settlement.

. . .

(d) ‘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. . . .

If the insured whose policy would be purchased is a viator, and Company A is purchasing the life insurance policy for its own account, it would have to be licensed as a viatical settlement company. If the insured would be a viator, and Company A is dealing with the insured on behalf of another entity seeking to purchase the policy for that other firm’s account, the inquirer’s firm would have to be licensed as a viatical settlement broker. If none of the insureds would be viators, there is no requirement that Company A be licensed by this Department.

Applications for licensure as a viatical settlement company may be obtained from:

Life Insurance Bureau
New York State Insurance Department
25 Beaver Street
New York, NY 10004.

Application for licensure as a viatical settlement broker may be obtained from:

Licensing Section
New York State Insurance Department
One Commerce Plaza
Albany, NY 12257.

Once Company A is licensed, it will automatically be placed on a mailing list for receipt of updates concerning the license it holds.

While the inquirer’s letter indicated that Company A had no intention to resell interests in policies to New York residents, the inquirer’s website indicates that Company A "will set a standard for the securitization of life settlement policies." This letter is limited to the requirements imposed pursuant to the New York Insurance Law (McKinney 2000 and 2003 Supplement). If Company A intends to offer interests in purchased policies, there may have to be compliance with additional statutes.

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