NY State Senate Bill 2011-S4427

Archive: Last Bill Status - In Senate Committee Insurance Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 04, 2012	referred to insurance
Apr 05, 2011	referred to insurance

co-Sponsors

2011-S4427 (ACTIVE) - Details

See Assembly Version of this Bill:: A7143
Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Amd §§7803, 7807, 7814 & 7819, rpld §7811 ¶13, sub§ (c) ¶3, Ins L

2011-S4427 (ACTIVE) - Summary

Relates to licensure of life settlement providers and certain reporting and disclosure requirements.

2011-S4427 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S4427

TITLE OF BILL:
An act
to amend the insurance law, in relation to the licensure and reporting
requirements of life settlement providers, certain disclosures of life
settlement providers and life settlement brokers, and scope of law for
life settlement contracts; and to repeal certain provisions of such
law relating thereto

PURPOSE:
The purpose of this legislation is to amend the New York
Life Settlement Act of 2009 to clarify provisions related to
implementation of that act for licensees and life settlement contract
transactions,

SUMMARY OF PROVISIONS:
Section 1 of the bill amends §7803(c)(2)(F) to
clarify the authority of the Superintendent to require applicants for
a life settlement provider license to submit any information the
Superintendent requires, provided such information will be "to verify
that the applicant qualifies as a life settlement provider and
determine compliance with any applicable state law," This amendment
conforms with the Superintendent's authority to require information
for applicants for a life settlement intermediary registration,
pursuant to §7804(d)(1). This section also adds a new paragraph (G)

to establish that the Superintendent shall not require an applicant
to provide any individual transaction data regarding the business of
life settlements, consistent with the limitation of such a
requirement for licensees.

Section 2 of the bill amends §7807(a)(1) to clarify that the annual
statement required to be submitted by licensed life settlement
providers shall include only statutorily mandated information and
that the information shall not include individual transaction data
regarding the business of life settlements,

Section 3 of the bill deletes §7811(a)(13) and renumbers the
subsequent subdivisions accordingly to eliminate the provision that
requires a life settlement provider to disclose to the seller of a
policy "any affiliations or contractual arrangements with any other
life settlement provider, life settlement broker, life settlement
intermediary or party financing the transaction".

Section 4 of the bill deletes §7811(c)(3) and renumbers the
subsequent subdivisions accordingly to eliminate the provision that
requires a life settlement broker to disclose to the seller "any
affiliations or contractual arrangements with any life settlement
provider, other life settlement broker, life settlement intermediary
or any financing entity."

Section 5 of the bill makes a conforming amendment to §7814(a)(6).

Section 6 of the bill amends §7819(a) and (c)(2) to clarify that the
provisions of Article 78 shall apply to any life settlement contract


entered into with an owner whose principal residence is in this
state, or with a bust that is sited in New York.

Section 7 of the bill sets forth the effective date of the law.

EXISTING LAW:
Article 78 of the Insurance Law, The New York Life
Settlement Act, was enacted pursuant to Chapter 499 of the Laws of
2009, to regulate the modern life settlement market in New York State.

JUSTIFICATION:
Since article 78 was enacted in 2009, concerns have
been raised regarding the application of various provisions of the
law. First, there is a concern about the State Insurance Department's
(SID) requirement that applicants for a life settlement provider
license submit individual transaction data, individual transaction
data on non-New York transactions and an applicant's past revenues
received from matured policies. As such, the bill places reasonable
limitations on the extent to which the department can require the
disclosure of individual transaction data from an application for a
life settlement provider license.

Additional concerns have been raised regarding SID's interpretation of
§ 7811(c)(3) to require that a broker must disclose any and all
affiliations with providers, brokers, intermediaries or financing
entities even though such person or entity is not involved in the
life settlement transaction and even though such person or entity is
not licensed or registered in New York. Similarly, SID also applied
the same conclusion with respect to § 7811(a)(13), as the "Required
Disclosures to Policy Owner" form issued by SID requires that a life
settlement provider provide the seller "about any affiliations or
contractual arrangements with any other life settlement provider,
life settlement broker, life settlement intermediary or party
financing the transaction."

SID partially modified this position in OGC Op. No. 11-02-07, with
respect to disclosures by life settlement providers, stating that
"Insurance Law § 7811(a)(13) is not intended to require a life
settlement provider to disclose to a life insurance policy owner
every agreement that the provider has with unaffiliated life
settlement brokers" but only "when the agreements have the same
boiler-plate language governing the manner in which the provider and
the broker will conduct business if the provider agrees to pursue a
life settlement application submitted by the life settlement broker,
and the life settlement brokers are not actually engaged in the life
settlement transaction."

However, this new SID OGC Opinion does not address disclosures by
brokers, disclosure of "affiliations", or disclosures of a provider's
contractual relationships or affiliations with financing entities.
There are still concerns that this will result in brokers and
providers inundating sellers with several hundred names of parties
that the broker or provider has relationships throughout the United
States and the world that have no relationship, no involvement with
or even knowledge of the life settlement transaction involving that
owner. This may result in additional and unnecessary confusion for
the owner of the policy.


Further, consumers are already receiving comprehensive information
related to the settlement transaction, including specific information
about relationships between the broker and provider and other persons
or entities directly involved in the settlement transaction,
Specifically, § 7811(a)(8) requires that the seller be advised of
"the name of each life settlement broker, life settlement
intermediary, insurance producer or insurance consultant that will be
compensated by the life settlement provider, or any affiliate, parent
corporation, or subsidiary of the life settlement provider; and the
amount of compensation that the life settlement provider, or any
affiliate, parent corporation or subsidiary of the life settlement
provider, shall provide to a life settlement broker, life settlement
intermediary, insurance producer or insurance consultant, or any
affiliate, parent corporation or subsidiary of such broker,
intermediary, producer, or consultant, pursuant to the life
settlement contract."

Also, § 7811(c)(4) has a similar requirement that the broker disclose
"the amount of compensation to be paid to the life settlement broker
pursuant to the life settlement contract, and the name of such life
settlement broker." Section 7811(a)(12) requires the policy owner
be advised of "any affiliations or contractual arrangements between
the life settlement provider and the issuer of the policy to be
settled." Other provisions ensure that the seller be advised of the
contact information of the escrow agent, the broker and provider.
Furthermore, in addition to the many provisions in the Act which
protect sellers against self-dealing or fraud, § 7814(a) establishes
numerous prohibited practices that ensure the transparency to
the seller about relationships of brokers and provider that are
relevant to the settlement transaction.

Finally, it should be noted that the new opinion creates a fair amount
of uncertainty for brokers and providers as there is no definition or
understanding as to what is a "boiler-plate agreement", or the
condition that such agreements govern the "maimer in which the
provider will conduct business if the provider agrees to purse a life
settlement application submitted by the life settlement broker, and
the life settlement brokers are not actually engaged in the life
settlement transaction."

An additional concern pertains to the current §7919 of the New York
Life Settlement Act, which provides that New York law applies in any
instance where the settlement is proposed to be made or where the
owner has a residence in New York. In other words, New York law
currently governs in situations where there is a conflict of law.
This legislation clarifies that New York law applies only where the
contract is entered into with an owner whose principal residence is
in New York. The legislation further clarifies that, with respect to
a trust, New York law will apply only where the owner of a policy is
a New York-based trust.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
None.


EFFECTIVE DATE:
Immediately.

2011-S4427 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  4427

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              April 5, 2011
                               ___________

Introduced by Sens. SEWARD, DeFRANCISCO -- read twice and ordered print-
  ed, and when printed to be committed to the Committee on Insurance

AN  ACT  to  amend  the  insurance law, in relation to the licensure and
  reporting requirements of life settlement providers,  certain  disclo-
  sures  of  life  settlement providers and life settlement brokers, and
  scope of law for life settlement  contracts;  and  to  repeal  certain
  provisions of such law relating thereto

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Paragraph 2 of subsection (c) of section 7803 of the insur-
ance law, as added by chapter 499 of the laws of 2009, is amended and  a
new paragraph 3 is added to read as follows:
  (2) The applicant for a life settlement provider license shall:
  (A) fully disclose the identity of all stockholders (except stockhold-
ers owning fewer than ten percent of the voting shares of a life settle-
ment  provider  whose  shares  are publicly traded), partners, officers,
members, directors and persons with a controlling interest. For purposes
of this section, "controlling interest" means a person who  directly  or
indirectly,  has  the  power  to  cause  to  be directed the management,
control or activities of such licensee;
  (B) provide a detailed plan of operation;
  (C) provide, if a legal entity, a certificate of  good  standing  from
the state of its domicile;
  (D)  provide an anti-fraud plan that meets the requirements of article
four of this chapter;
  (E) demonstrate financial accountability as evidenced  by  a  bond  or
other  method  for  financial accountability as determined by the super-
intendent pursuant to regulation; and
  (F) provide any other information required by  the  superintendent  TO
VERIFY  THAT  THE  APPLICANT QUALIFIES AS A LIFE SETTLEMENT PROVIDER AND
DETERMINE COMPLIANCE WITH ANY APPLICABLE STATE LAW.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10259-02-1

S. 4427                             2

  (3) THE SUPERINTENDENT SHALL NOT REQUIRE AN APPLICANT TO  PROVIDE  ANY
INDIVIDUAL TRANSACTION DATA REGARDING THE BUSINESS OF LIFE SETTLEMENTS.
  S  2.  Paragraph  1 of subsection (a) of section 7807 of the insurance
law, as added by chapter 499 of the laws of 2009, is amended to read  as
follows:
  (1)  Every  licensed life settlement provider shall file in the office
of the superintendent, annually on or before the first day of  March,  a
statement,  to be known as its annual statement, verified by the oath of
at least two of its principal officers, showing its condition at the end
of the preceding calendar year. The statement shall be in such form  and
shall  contain such other matters as the superintendent shall prescribe.
[In addition to any other requirements, the] THE annual statement  shall
specify  the  total  number,  aggregate  face amount and life settlement
proceeds of policies settled during the immediately  preceding  calendar
year, together with a breakdown of the information by policy issue year.
The  information shall not include individual transaction data regarding
the business of life settlements [or information if there is  a  reason-
able  basis  to  believe  the  information could be used to identify the
owner or the insured].
  S 3. Paragraph 13 of subsection (a) of section 7811 of  the  insurance
law  is  REPEALED  and paragraphs 14, 15, 16 and 17 are renumbered para-
graphs 13, 14, 15 and 16.
  S 4. Paragraph 3 of subsection (c) of section 7811  of  the  insurance
law  is  REPEALED and paragraphs 4 and 5 are renumbered paragraphs 3 and
4.
  S 5. Paragraph 6 of subsection (a) of section 7814  of  the  insurance
law,  as added by chapter 499 of the laws of 2009, is amended to read as
follows:
  (6) directly or indirectly, purchase or  obtain  an  interest  in  any
policy  that  is  the  subject  of  a life settlement contract where the
person has acted as a life settlement broker or life settlement interme-
diary with respect to the  policy,  unless  such  affiliation  has  been
disclosed to the owner pursuant to [paragraph three of subsection (c) of
section seven thousand eight hundred eleven of] this article; and (A) if
a life settlement broker, the broker has provided all offers and counter
offers  pursuant  to  paragraph  two  of subsection (c) of section seven
thousand eight hundred eleven of this article,  and  has  conducted  the
transaction  on  a  fair  and  equitable  arm-length  basis; or (B) with
respect to a life settlement  intermediary,  the  intermediary  complies
with  subsection (o) of section seven thousand eight hundred thirteen of
this article;
  S 6. Section 7819 of the insurance law, as added by chapter 499 of the
laws of 2009, is amended to read as follows:
  S 7819. Applicability and choice of law. (a) The  provisions  of  this
article  shall  ONLY  apply  to  [any] A life settlement contract [made,
proposed to be made, or solicited] ENTERED INTO with [a resident of]  AN
OWNER  WHOSE  PRINCIPAL  RESIDENCE  IS IN this state [or any owner phys-
ically in this state].
  (b)(1) If there is more than one owner on a  single  policy,  and  the
owners  are  residents  of different states, then the state of residency
shall be the state in which the owner having the largest  percentage  of
ownership  resides  or, if the owners hold equal ownership, the state of
residence of one owner, agreed upon in writing by all of the owners.
  (2) A life settlement contract entered into with an  owner  who  is  a
resident of another state may be governed by the laws of the other state
provided  that the owner elects in writing to be governed by the laws of

S. 4427                             3

the other state, and if the owner is also a resident of this state,  the
life  settlement  contract  is  made,  proposed to be made and solicited
outside this state.
  (c) For the purposes of this section, with respect to any person other
than a natural person, the state of residence shall be:
  (1)  the  state  in  which the person maintains its principal place of
business; or
  (2) with respect to a trust, a state in which  the  [grantor  resides]
TRUST IS SITED.
  S 7. This act shall take effect immediately.

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Senate Bill S4427

Sponsored By

Archive: Last Bill Status - In Senate Committee Insurance Committee

co-Sponsors

2011-S4427 (ACTIVE) - Details

2011-S4427 (ACTIVE) - Summary

2011-S4427 (ACTIVE) - Sponsor Memo

2011-S4427 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S4427

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Sponsored By

James L. Seward

Archive: Last Bill Status - In Senate Committee Insurance Committee

co-Sponsors

John A. DeFrancisco

2011-S4427 (ACTIVE) - Details

2011-S4427 (ACTIVE) - Summary

2011-S4427 (ACTIVE) - Sponsor Memo

2011-S4427 (ACTIVE) - Bill Text download pdf

Comments