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

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 09-02-04

The Office of General Counsel issued the following opinion on February 9, 2009, representing the position of the New York State Insurance Department.

Re: License to Broker Life Settlements in New York

Question Presented:

In New York, is a life settlement broker’s license required for a person who brokers the sale of a life insurance policy from the original owner to a third party buyer?

Conclusion:

No, in New York, no life settlement brokers’ license is currently required. A license is required, however, to broker viatical settlements, which are a subset of life settlements1 .

Facts:

The inquirer reports that the inquirer is a financial service provider, and that the inquirer has been approached by several people regarding life settlements. The inquirer further reports that these inquiries are from those who insist that they would only engage a life settlement transaction with someone who is either appropriately licensed, or has proof that no license is required. The inquirer asks whether a license is required to broker life settlements in New York State.

Analysis:

At present, the law in New York does not make any provision for a life settlement broker’s license. However, please be advised that as stated in the New York State Assembly Memorandum In Support of the Bill that became Chapter 638 of the Laws of 1993 governing viatical settlements, the purpose of New York law is to protect “consumers by regulating viatical settlement companies. These companies offer to purchase life insurance benefits from terminally ill people, providing the policy holder with needed monies to assist in the payment of rent, medical care or other essential items not covered by insurance.” See Opinion of the Office of General Counsel (“OGC”) dated April 21, 1999.

N.Y. Ins. Law § 7801(a) (McKinney 2008) defines in pertinent part a viatical settlement company 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 . . .

Insurance Law § 7801(b) defines a viator, and reads in pertinent 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 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.

In order to work as a viatical settlement broker in New York, one must comply with Article 78 of the Insurance Law, which includes a licensing requirement at Insurance Law § 7801(d). See OGC Opinions dated March 17, 2004; November 14, 2001; and April 21, 1999.

Because brokering a sale of individual life insurance contracts by owners to third parties does not meet the statutory definition of viatical settlements, life settlement brokers currently require no license in New York. However, if proposed life settlements legislation is enacted and signed into law, a license would be required.

For further information, one may contact Senior Attorney Susan A. Dess at the New York City office.

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1 A life settlement is an agreement whereby a life insurance policy owner sells a life insurance policy to a third party who receives the policy benefits upon the death of the insured.