What steps have been taken to control the proliferation of stranger originated life insurance (STOLI)?
At their June 2007 meeting in San Francisco, the National Association of Insurance Commissioners (NAIC) drafted a model statute for consideration by state legislatures to limit STOLI insurance. This model statute or variations of it are being passed by many states not allowing the transfer of life insurance for between two to five years from the date of original purchase. States are also now beginning to regulate life settlement transactions and requiring life settlement brokers to be licensed. In addition, the life insurance industry has started using new pricing tables that discourage the practice among life agents of writing policies on seniors with the intent of doing a life settlement and then using the proceeds of the settlement to write additional policies on that same senior in two years.
