SOURCE: Life Insurance Settlement Association

March 27, 2007 13:12 ET

LISA Corrects Its Comments About Oklahoma State University Insurance Program

ORLANDO, FL -- (MARKET WIRE) -- March 27, 2007 --Following discussions with representatives of the insurance producers for the recent Oklahoma State University $250 million of face amount charitable life insurance transaction, Doug Head, executive director of the Life Insurance Settlement Association, states that, "The record deserves correction and clarification given the ambiguous stranger-owned life insurance rhetoric used by the life insurance industry, which causes legitimate and proper charitable uses of life insurance to be misperceived and, under currently proposed changes to the NAIC's Viatical Settlements Act, as suspect of violating insurable interest requirements. Based on new information that we have obtained, we are satisfied that there is, in fact, insurable interest in the insureds under OSU's program.

"We now understand from these life insurance producers that the recent OSU charitable life insurance program is not what LISA considers to be stranger-initiated life insurance, a misuse of life insurance where only investors stand to reap substantially all of all the death benefits of life insurance purchased by charities. LISA regrets any errors it may have made in its statements of last week, which followed on from other, prior reports of this transaction and the fact that a financing facility was used to pay insurance premiums," said Mr. Head. Both charitable life insurance and the ability to borrow money to finance insurance premium payments are lawful, legitimate and useful transactions. This is true despite the life insurance industry's assertion that only life insurance benefiting families who have lost their primary income earner is legitimate. This is true despite the claims of life insurers and their spokespersons and some insurance regulators, that life insurance borrowing arrangements that do not limit their collateral solely to the cash surrender value of a policy are presumed to be suspect of insurable interest violations and therefore should be banned from bona fide life settlements for a period of 5 years.

"The OSU donor life insurance program clearly illustrates the mischaracterization caused by the use by many in the life insurance industry of ill-defined, charged terms like STOLI and SOLI," notes Mr. Head. Under the NAIC's proposed amendment to its life settlement act, a STOLI policy would include any life insurance policy unless the premiums for which "have been funded exclusively with unencumbered assets, including an interest in the life insurance policy being financed only to the extent of its net cash surrender value, provided by, or fully recourse liability incurred by, the insured...."

"We are happy to clear up any misunderstanding about our comments concerning the university's program as we do not believe this is STOLI even though LISA believes this type of transaction would be treated as such under the NAIC's proposal, which is scheduled to be reconsidered for a vote in June following its reevaluation next month following the NAIC's determination not to adopt the proposals 2 weeks ago."

Founded in 1994, the Life Insurance Settlement Association is the oldest and largest trade organization in the industry. Its goal is to promote the development, integrity and reputation of the life settlement industry, and to promote a competitive market for the people it serves. LISA now represents 140 member companies with a wide variety of interests in the industry.

A life settlement is the sale to a third party of an existing life insurance policy for more than its cash surrender value but less than its net death benefit. Such transactions are usually undertaken for the purposes of estate or financial planning.

Contact Information

  • Contact:
    Doug Head
    Executive Director
    LISA
    407-894-3797
    Email Contact