Current through Reg. 50, No. 13; March 28, 2025
(a) Life settlement
contracts. All contracts used to effectuate life settlements must contain the
provisions set forth in paragraphs (1) - (8) of this subsection, as follows:
(1) a provision that the life settlement
contract or the contract together with the application, including any
amendments and attachments, constitute the entire contract between the
parties;
(2) a provision that any
change to the life settlement contract is valid only on written approval by an
executive officer of the life settlement provider designated in the contract
with authority to bind the provider and that such approval must be endorsed in
or attached to the life settlement contract. The provision must also state that
no person, other than an executive officer of the provider, has the authority
to change the life settlement contract or to waive any of its
provisions;
(3) a provision that,
in the absence of fraud, all statements made by the owner and insured are
representations and not warranties;
(4) a provision that the owner may designate
any individual of legal age, in regular contact with the insured, as a contact
for inquiries about the insured's health status on written notice providing the
name, address, and telephone number of such individual. The provision must
include a statement that the owner may change a designation at any time on
written notice to the life settlement provider;
(5) a provision that the licensed life
settlement provider must provide to the insured the name, address, and
telephone number of the life settlement broker, provider, or authorized
representative of the provider or broker that will contact the insured or the
insured's designee for tracking purposes and must notify the insured of any
change in such information;
(6) a
provision defining how any notice required or permitted under the contract must
be given and delivered;
(7) a
provision disclosing what effect the life settlement contract will have on
payment of premiums and disposition of proceeds, cash values, and dividends;
and
(8) a provision disclosing
that, if the policy that is the subject of the life settlement contract is a
joint policy, or contains riders or other provisions insuring the lives of a
spouse, dependents, or anyone else other than the owner, there may be a
possible loss of coverage, and that the owner should contact the owner's
insurance company or agent to determine if the coverage may be converted to
avoid losing the coverage.
(b) Prohibited provisions. A contract used to
effect life settlement must not:
(1) contain
an indemnification or a hold harmless provision that requires the owner or
insured to protect another person against liability, loss, or damages that
exceed the proceeds of the life settlement contract received by the owner;
or
(2) require any owner to
condition a life settlement contract on the exclusive dealing between the owner
and the life settlement broker or provider.
(c) Accidental death benefits. The death
benefit provision for accidental death contained within the policy must remain
payable to the beneficiary last named by the owner or to the owner's estate.
Nothing contained here requires the life settlement provider or any subsequent
owner of the policy to continue any accidental death benefits attached to the
policy by rider or endorsement.
(d)
Retained ownership. If a life settlement provider enters into a life settlement
contract that allows the owner to retain an interest in the policy, or if the
policy contains a clause in the policy or attached to the policy by rider, that
provides a death benefit for accidental death, the life settlement contract or
amendment must contain a provision that:
(1)
the life settlement provider will transfer the amount of the net death benefit
only to the extent or portion of the amount sold. The provision must also state
that benefits in excess of the amount sold will be paid by the insurance
company directly to the beneficiaries in accord with the terms of the
policy;
(2) the life settlement
provider will, on acknowledgment of the perfection of the transfer, either:
(A) advise the owner in writing that the
insurance company has confirmed the owner's remaining interest in the policy;
or
(B) provide the owner with a
copy of the document prepared by the insurance company that acknowledges the
owner's remaining interest in the policy; and
(3) defines the apportionment of premiums the
life settlement provider and the owner will pay. The life settlement contract
or amendment may specify that the life settlement provider will pay all
premiums. The contract or amendment may also require the owner to reimburse the
life settlement provider for the premiums attributable to the remaining
interest, including any premiums for the accidental death benefit, subsequent
to the life settlement contract.
(e) General contract requirements. All life
settlement contracts, in addition to meeting the other requirements of this
section, must contain:
(1) consistent
terminology;
(2) a section defining
key terms used in the life settlement contract;
(3) the name of the owner and
insured;
(4) the number of the
policy that serves as the basis for the life settlement contract;
(5) the name of the insurance company
underwriting the policy at the time of contract;
(6) the amount of the net death benefit of
the policy; and
(7) signature lines
for the life settlement provider and the owner.
(f) Required disclosures. All life settlement
contracts, in addition to meeting the other requirements of this section, must
contain the written disclosures required by Insurance Code §
1111A.012 and §
1111A.014 for delivery
to the owner by the life settlement broker, or provider if there is no broker
involved in the transaction, with each application for a life settlement
contract. For purposes of Insurance Code §
1111A.012(a)(8),
if the amount of compensation is not known at the time of application, the
method of calculation must be provided at the time of application, and the
amount of compensation must be provided at the date the life settlement
contract is signed by the owner.
(g) Escrow and trust. A life settlement
provider that places the proceeds of the life settlement contract into an
escrow or trust account must comply with the following:
(1) the escrow agent may not be any person
under common control with a life settlement broker or provider;
(2) the escrow or trust agreement must
contain:
(A) the name of the owner;
(B) the number of the policy that serves as
the basis for the life settlement contract;
(C) the name of the insurance company
underwriting the policy at the time of contract execution;
(D) the name of the life settlement provider
purchasing the policy;
(E) the
name, address, and telephone number of the escrow agent or trustee;
(F) the amount of the owner's proceeds placed
into the escrow or trust account;
(G) all terms and conditions of the escrow or
trust agreement;
(H) the name and
address of the financial institution holding the escrow funds into which the
provider will pay the funds to the owner;
(I) a description of the purpose of the
escrow or trust account;
(J) the
circumstances that will trigger disbursement of the funds from the escrow or
trust account;
(K) the limitations
concerning, or time restrictions for, the insurance company's affirmative
acceptance and acknowledgement of the assignment of the policy;
(L) if applicable, the process for required
notices for communication if the owner rescinds the life settlement contract
pursuant to Insurance Code §
1111A.012(a)(5)
or if the insurance company does not accept the policy assignment or transfer
of ownership;
(M) the duties of the
escrow agent or trustee;
(N) the
designation of the escrow agent or trustee;
(O) the limits of liability for the escrow
agent or trustee;
(P) the process
for resolving any dispute arising between the owner and the life settlement
provider, the escrow agent, or the trustee concerning the interpretation of the
escrow or trust agreement; and
(Q)
a signature line for the life settlement provider, the owner, and the escrow
agent or trustee.
(h) Medical release. A medical release form
must:
(1) be in writing and signed by the
insured; and
(2) disclose the
medical records covered by the release, the purposes for the release, the
identity of the person to whom the information is to be released, any
limitations on the right to withdraw consent, and that the release form may be
used to determine and track the insured's ongoing health status.
(i) Policy release. A policy
release form must:
(1) be in writing and
signed by the owner; and
(2)
disclose the information covered by the release, the purposes of the release,
the identity of the person to whom the information is to be released, and the
owner's right to withdraw consent.
(j) Power of attorney. A power of attorney
form must be limited to the purpose of releasing medical information in
connection with the settlement transaction, including tracking the ongoing
health status of the insured.
(k)
Verification of coverage. A verification request form must be limited to
information relevant to the life settlement contract, including, if requested:
(2) the cash surrender value;
(3) the accelerated death benefit at that
time; and
(4) the premium and mode
of premium payment.
(l)
Owner's copies. The life settlement broker or provider must provide the owner
with a copy of the life settlement contract and all materials used to
effectuate the life settlement contract, including the application, a copy of
the escrow or trust agreement, and any consent forms or any other document that
the life settlement broker or provider required the owner or the owner's
representative to sign to effectuate the life settlement contract. The life
settlement contract and all other materials used to effectuate the life
settlement contract must be provided at no charge to the owner.
