NAIC adopts life settlements model act.

National Association of Insurance Commissioners regulators have adopted a revised model law that seeks to thwart so-called stranger-originated life settlements.

With the NAIC's new model law criteria in place, much of the debate that preceded adoption of the revised Viatical Settlements Model Act had more to do with procedural questions. Chiefly at issue was a new mandate that compels insurance regulators voting on the measure to commit to pushing the law in their respective states.

The model was the first to be vetted through the organization's new process. Under the NAIC's new model law-drafting framework, a committee with senior oversight of a model law and the NAIC Executive Committee must approve--by simple majority vote--the development of any model law before the drafting process begins. The draft legislation must also target a national standard that is deemed in need of uniformity among states. The model must have regulators and other backers who are willing to fight for passage in state legislatures.

"Everything we're hearing today is related to procedure,' said North Dakota Insurance Commissioner Jim Poolman, who, as the former chairman of the NMC's Life Insurance and Annuities Committee, helped to draw up the model's language. "I don't think we've come up with a uniform definition of commitment. What is commitment? Does it mean we inform our legislatures? We will cripple this organization if people can't take a stand on public policy."

NAIC President-Elect and Kansas Insurance Commissioner Sandy Praeger said that, as regulators, state insurance chiefs can't make lawmakers pass laws. The model revisions have been the subject of debate between regulators and members of the life settlement industry since May 2006, when the NAIC gathered in New York to hear suggestions on reining in speculative uses of life insurance by revamping the Viatical Settlements Model Law, adopted by the NAIC in 1993.

The revisions restrict life settlement transactions on policies whose premiums are paid for by an entity other than the policyholder. Under the amended model, the sale of such a policy would be prohibited within five years of inception. However, life settlement industry representatives have opposed the five-year ban, saying it takes away consumer freedoms and presents serious legal issues.

Stories written by Senior Associate Editor Eleanor Barrett