Ohio state legislators proposed a stranger-originated life insurance (STOLI) bill, and officials in New York appear to be composing STOLI legislation of their own. In 2007, the National Association of Insurance Commissioners and the National Conference of Insurance Legislators labored on STOLI provisions and other alterations for model laws connected to the life settlement and life insurance premium finance markets. States are launching their own initiatives to deal with concerns about STOLI arrangements. STOLI arrangement organizers locate investors who aid unrelated consumers in purchasing life insurance, primarily to generate policies for sale in the life settlement market. STOLI arrangement critics contend the arrangements breach state insurable interest laws and could endanger the laws that currently enable life insurance death benefits payments to be exempt from federal income taxes. Some say STOLI organizers circumvent efforts to deter STOLI arrangements by purchasing life insurance through trusts. The Ohio STOLI legislation would limit an insured's power to sell a policy for five years if certain conditions exist—if the pact to sell the policy was agreed upon before a consumer presented an application or if the deal was made before the insurer issued the policy. The Ohio bill would include exceptions for insureds who go through divorce or other life-changing events. In New York, the proposal may include a two-year limit on life policy sales, in addition to further regulation on the role of trusts in STOLI arrangements
STOLI Bills Surface at State Level
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National Underwriter (Life and Health Financial Services Edition) (12/13/07) Connolly, Jim
