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

Eliot Spitzer
Governor

Louis Pietroluongo
Acting Superintendent

The Office of General Counsel issued the following opinion on January 4, 2007 representing the position of the New York State Insurance Department.

Re: Viatical Settlement Proposal

Question:

Is it legal for one individual to purchase a life insurance policy directly from the insured individual, where such insured individual has a catastrophic or life threatening condition?

Conclusion:

No, an individual may only make such a purchase if he is duly licensed as a viatical settlement company in New York.

Facts:

An individual, who is HIV positive, and who owns a $100,000 policy on his own life has asked if another individual would consider purchasing the policy from him.

Analysis:

The transaction that described is defined under New York Law as a "viatical settlement". Such transactions are governed by Article 78 of the New York Insurance Law. The following provisions of that article are relevant to the instant inquiry:

The term "viatical settlement" is defined as follows:

‘Viatical settlement’ means an agreement entered into between a viatical settlement company and a viator. The agreement shall establish the terms 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.

N. Y. Ins. Law § 7801(c)(McKinney 2000).

The term "viator" is defined as follows:

‘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.

N.Y. Ins. Law § 7801(b)(McKinney 2000).

The term "viatical settlement company" is defined as follows:

‘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. . . .

N.Y. Ins. Law § 7801(a)(McKinney 2000).

Finally, New York Ins. Law § 7802(a) (McKinney Supp. 2006) requires that no individual or other entity may act as a viatical settlement company or broker or enter into or solicit a viatical settlement without first being licensed by this Department.

Given the facts presented, it appears that the proposal involves entry into a viatical settlement agreement with a policyholder. Only a duly licensed viatical settlement company or broker in the state of New York, may permissibly enter into such a transaction under New York law.

For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.