How are Life Settlements Regulated in California?

Oct 20, 2021 9:10:00 AM / by LISA

California, like most states, has its own rules and regulations governing life settlements. If you are a life settlement provider in California, be sure to familiarize yourself with the nuances, as they do change from time to time. If you are applying to be a life settlement provider and looking to get a life settlement license, the following also provides information on how to accomplish this.

Life Settlement Provider Definition

While life settlements have been around since 1911, regulations were put in place much more recently. In October 2009, the California legislature enacted and the governor signed Senate Bill 1543. The life settlement law, called the “Life Settlements Act,” has regulated life settlement and STOLI (stranger-originated life insurance) transactions since July 1, 2010. With a few exceptions, it does not apply to life settlement contracts entered into before or on this date. 

In the Golden State, viatical settlements and other specific financial arrangements are considered “life settlements” in The California Insurance Code (CIC) Sections 10113.1 and 10113.2. Life settlement provider requirements in California stipulate that providers must have a Life Settlement Provider license in order to enter into or conduct a life settlement contract with an owner.

Life settlement companies are defined by law as the things which they are not: 

  1. Any bank, savings bank, savings and loan association or credit union.
  2. A licensed lending institution or creditor or secured party pursuant to a premium finance loan agreement which takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy as collateral for a loan.
  3. The insurer of a life insurance policy or rider to the extent of providing accelerated death benefits or riders or cash surrender value.
  4. A purchaser.
  5. Any authorized or eligible insurer that provides stop loss coverage to a provider, purchaser, financing entity, special purpose entity or related provider trust.
  6. A financing entity.
  7. A related provider trust.
  8. A broker.
  9. An accredited investor or qualified institutional buyer as defined respectively in Regulation D, Rule 501 or Rule 144A of the federal Securities Act of 1933, as amended, who purchases a life settlement policy from a provider.

Life Settlement Provider Application

California currently has twenty-three life settlement providers listed on its website. If you are interested in getting your life settlement provider license in California, you will need to submit an Application for a Life Settlement Provider, form LIC 441-19, along with an application fee, which is in the "Certificate of Authority" fee category on the Schedule of Fees and Charges

Once you’ve completed the Life Settlement Provider application, you can upload a copy of the application through the Department's OASIS (Online Assistance System for Insurer Submittals), and upload all forms you will be using to transact California life settlement business. Important: you’ll need an Entity Identifying Number (EID) before using OASIS. Simply contact the Department of Insurance by emailing either CAB-SF-Intake or calling 415-538-4035 to get your EID. Let the department know your complete name and that you’re seeking a Life Settlement Provider's License.

Application Requirements:

  •       An Applicant Certification: The person having authority to bind the provider (is that you, the provider—please confirm?) must certify that you have reviewed sections 10113.1 through 10113.3 of the California Insurance Code and Section 2548.1 et seq. (Life Settlements) of Title 10 of the California Code of Regulations. 
  •       Confirmation: You must confirm that pursuant to sections 10113.1(g)(2)(D) and 10113.2(b) of the CIC, any false statement may subject your application to denial and may subject your license/s to suspension and revocation.

Finally, when the Commissioner issues the provider’s license to a legal entity, it authorizes all officers, partners and key management personnel to act as a life settlement provider.

Life Settlement Provider License Renewal

Since the Life Settlement Provider license is valid for one year, you’ll need to renew each year. Check the "Renewal Fee Certificates Of Authority/Licenses" fee category on the Schedule of Fees and Charges for fee information.

As a life settlement provider, you’ll have the fiduciary duty to help life insurance policyholders make the financial decisions that are in their best interest. You’ll help them unlock the cash inside their unwanted policies so they gain the freedom to fund other investments, help with grandchildren’s education, afford better medical care, overcome bankruptcy or take advantage of any other benefits that come with this financial boon. At LISA, we are here to support you—and your clients—every step of the way.

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Tags: Financial Advisors, life settlement, Life Insurance Settlement, Life Settlement Provider

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Written by LISA