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New Hampshire Governor John Lynch (D) signed HB 660 into law which enacted life settlement legislation in New Hampshire effective June 14, 2010 (the "Act"). The Act is primarily based on the National Association of Insurance Commissioners' model, and, among other things, imposes restrictions with respect to stranger-originated life insurance transactions ("STOLI").The Act defines STOLI, in pertinent part, as:
"...a practice or plan to initiate a life insurance policy for the benefit of a third party investor who, at the time of policy origination, has no insurable interest in the insured. STOLI practices include but are not limited to cases in which life insurance is purchased with resources or guarantees from or through a person, or entity who, at the time of policy inception, could not lawfully initiate the policy himself, herself, or itself, and where, at the time of inception, there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy and/or the policy benefits to a third party. Trusts that are created to give the appearance of insurable interest and are used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life..."
The Act restricts STOLI transactions by requiring investors to wait at least five (5) years before collecting death benefits under a policy. This restriction only applies to STOLI policies; it does not apply to policies originally purchased for an insurance protection purpose.In addition to restricting STOLI transactions, the Act also sets forth requirements for the licensing and appointment life settlement providers, the approval of contract and disclosure statements, reporting and privacy, and record retention, among other things.Access a copy of the New Hampshire Life Settlements Act.
© Copyright 2010 by Edwards Angell Palmer and Dodge LLP. All rights reserved. Reprinted with permission. This blog originally appeared on the InsureReinsure Blog. The InsureReinsure Blog is one of the Insurance Law Center's Top 50 Insurance Blogs for 2008. See the Top 50 Insurance Blogs list.