§ 508E.2 — Definitions

Iowa § 508E.2

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 508E: VIATICAL SETTLEMENT CONTRACTS

Text

As used in this chapter, unless the context otherwise requires:
1. “Advertising” means any written, electronic, or printed communication or any
communicationbymeansofrecordedtelephonemessagesortransmittedonradio, television,
the internet, or similar communications media, including film strips, motion pictures, and
videos, published, disseminated, circulated, or placed directly before the public in this state,
for the purpose of creating an interest in or inducing a person to sell, assign, devise, bequest,
or transfer the death benefit or ownership of a life insurance policy pursuant to a viatical
settlement contract.
2. “Business of viatical settlements” means an activity involved in but not limited to the
offering, soliciting, negotiating, procuring, effectuating, purchasing, investing, financing,
monitoring, tracking, underwriting, selling, transferring, assigning, pledging, hypothecating,
or in any other manner acquiring an interest in a life insurance policy by means of a viatical
settlement contract.
3. “Chronically ill” means any of the following:
a. Being unable to perform or maintain at least two activities of daily living, including but
not limited to eating, toileting, transferring, bathing, dressing, or continence.
b. Requiring substantial supervision to protect the individual from threats to health and
safety due to severe cognitive impairment.
c. Having a level of disability similar to that described in paragraph “a” as determined by
the United States secretary of health and human services.
4. “Commissioner” means the commissioner of insurance.
5. a. “Financing entity” means an underwriter, placement agent, lender, purchaser of
securities, purchaser of a policy or certificate from a viatical settlement provider, credit
§508E.2, VIATICAL SETTLEMENT CONTRACTS 2
enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject
of a viatical settlement contract, but subject to all of the following:
(1) Whose principal activity related to the transaction is providing funds to effect the
viatical settlement or purchase of one or more viaticated policies.
(2) Who has an agreement in writing with one or more licensed viatical settlement
providers to finance the acquisition of viatical settlement contracts.
b. “Financing entity” does not include a nonaccredited investor or a viatical settlement
purchaser.
6. “Fraudulent viatical settlement act” includes any of the following:
a. An act or omission committed by any person who, knowingly or with intent to defraud,
for the purpose of depriving another of property or for pecuniary gain, commits or permits
its employees or its agents to engage in acts including any of the following:
(1) Presenting, causing to be presented, or preparing with knowledge or belief that it
will be presented to or by a viatical settlement provider, viatical settlement broker, viatical
settlement purchaser, financing entity, insurer, insurance producer, or any other person,
false material information, or concealing material information, as part of, in support of, or
concerning a fact material to one or more of the following:
(a) An application for the issuance of a viatical settlement contract or insurance policy.
(b) The underwriting of a viatical settlement contract or insurance policy.
(c) A claim for payment or benefit pursuant to a viatical settlement contract or insurance
policy.
(d) Premiums paid on an insurance policy.
(e) Paymentsandchangesinownershiporbeneficiarymadeinaccordancewiththeterms
of a viatical settlement contract or insurance policy.
(f) The reinstatement or conversion of an insurance policy.
(g) In the solicitation, offer, effectuation, or sale of a viatical settlement contract or
insurance policy.
(h) The issuance of written evidence of viatical settlement contract or insurance policy.
(i) A financing transaction.
(2) Employing any plan, financial structure, device, scheme, or artifice to defraud related
to viaticated policies.
(3) Entering into any practice or plan which involves stranger-originated life insurance.
(4) Failing to disclose to the insurer when requested by the insurer that the prospective
insured has undergone a life expectancy evaluation by any person or entity other than the
insurer or its authorized representative in connection with the issuance of the policy.
b. In the furtherance of a fraud or to prevent the detection of a fraud to do, or permit an
employee or agent to do, any of the following:
(1) Remove, conceal, alter, destroy, or sequester from the commissioner the assets or
records of a licensee or other person engaged in the business of viatical settlements.
(2) Misrepresent or conceal the financial condition of a licensee, financing entity, insurer,
or other person.
(3) Transact the business of viatical settlements in violation of laws requiring a license,
certificate of authority, or other legal authority for the transaction of the business of viatical
settlements.
(4) File with the commissioner or the equivalent chief insurance regulatory official
of another jurisdiction a document containing false information or otherwise conceal
information about a material fact from the commissioner.
c. Embezzlement, theft, misappropriation, or conversion of moneys, funds, premiums,
credits, or other property of a viatical settlement provider, insurer, insured, viator, insurance
policyowner, oranyotherpersonengagedinthebusinessofviaticalsettlementsorinsurance.
d. Recklessly entering into, negotiating, brokering, or otherwise dealing in a viatical
settlement contract, the subject of which is a life insurance policy that was obtained by
presenting false information concerning any fact material to the policy or by concealing,
for the purpose of misleading another, information concerning any fact material to the
policy, where the person or the persons intended to defraud the policy’s issuer, the viatical
settlement provider, or the viator. As used in this paragraph, “recklessly” means engaging
3 VIATICAL SETTLEMENT CONTRACTS, §508E.2
in the conduct in conscious and clearly unjustifiable disregard of a substantial likelihood of
the existence of the relevant facts or risks, such disregard involving a gross deviation from
acceptable standards of conduct.
e. Facilitating the change of state of ownership of a policy or certificate or the state of
residency of a viator to a state or jurisdiction that does not have a law similar to this chapter
for the express purposes of evading or avoiding the provisions of this chapter.
f. Attempting to commit, assisting, aiding or abetting in the commission of, or conspiracy
to commit the acts or omissions specified in this subsection.
7. “Life insurance producer” means any person licensed in this state as a resident or
nonresident insurance producer who has received qualification or authority for life insurance
coverage or a life line of coverage pursuant to chapter 522B.
8. “Person” means a natural person or a legal entity, including, without limitation, an
individual, partnership, limited liability company, association, trust, or corporation.
9. “Policy”meansanindividualorgrouppolicy,groupcertificate,contract,orarrangement
of life insurance owned by a resident of this state, regardless of whether delivered or issued
for delivery in this state.
10. “Related provider trust” means a titling trust or other trust established by a licensed
viaticalsettlementproviderorafinancingentityforthesolepurposeofholdingtheownership
or beneficial interest in purchased policies in connection with a financing transaction. The
trust shall have a written agreement with the licensed viatical settlement provider under
whichthelicensedviaticalsettlementproviderisresponsibleforensuringcompliancewithall
statutory and regulatory requirements and under which the trust agrees to make all records
and files related to viatical settlement transactions available to the commissioner as if those
records and files were maintained directly by the licensed viatical settlement provider.
11. “Special purpose entity” means a corporation, partnership, trust, limited liability
company, or other similar entity formed solely to provide either directly or indirectly access
to institutional capital markets for or in connection with any of the following:
a. For a financing entity or licensed viatical settlement provider.
b. (1) Inconnectionwithatransactioninwhichthesecuritiesinthespecialpurposeentity
are acquired by the viator or by qualified institutional buyers as defined in 17 C.F.R. §230.144
promulgated by the United States securities and exchange commission under the federal
Securities Act of 1933, as amended, 15 U.S.C. §77a et seq.
(2) In connection with a transaction in which the securities pay a fixed rate of return
commensurate with established asset-backed institutional capital markets.
12. “Stranger-originated life insurance” means a practice or an act 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.
a. Stranger-originated life insurance practices include cases in which life insurance is
purchasedwithresourcesorguaranteesfromorthroughapersonorentitywho, atthetimeof
the policy inception, could not lawfully initiate the policy by the person or entity, and where,
at the time of the policy’s inception, there is an arrangement or agreement, whether verbal
or written, to directly or indirectly transfer the ownership of the policy or the policy benefits
to a third party. Trusts that are created to give the appearance of an insurable interest, and
are used to initiate policies for investors, violate insurable interest laws and the prohibition
against wagering on life.
b. Stranger-originatedlifeinsurancearrangementsdonotincludethosepracticessetforth
in subsection 15, paragraph “d”.
13. “Terminally ill” means having an illness or sickness that can reasonably be expected
to result in death in twenty-four months or less.
14. “Viatical settlement broker” means a person, including a life insurance producer,
who, working exclusively on behalf of a viator and for a fee, commission, or other valuable
consideration, offers or attempts to negotiate viatical settlement contracts between a viator
and one or more viatical settlement providers or one or more viatical settlement brokers.
Notwithstanding the manner in which the viatical settlement broker is compensated, a
viatical settlement broker is deemed to represent only the viator, and not the insurer or the
viatical settlement provider, and owes a fiduciary duty to the viator to act according to the
§508E.2, VIATICAL SETTLEMENT CONTRACTS 4
viator’s instructions and in the best interest of the viator. “Viatical settlement broker” does
not include an attorney, certified public accountant, or a financial planner accredited by
a nationally recognized accreditation agency who is retained to represent the viator and
whose compensation is not paid directly or indirectly by the viatical settlement provider or
purchaser.
15. a. “Viatical settlement contract” means a written agreement entered into between a
viator and a viatical settlement provider or any affiliate of the viatical settlement provider
establishing the terms under which compensation or anything of value is or will be paid,
which compensation or value is less than the expected death benefits of the policy in return
for the viator’s present or future assignment, transfer, sale, devise, or bequest of the death
benefit or ownership of any portion of the insurance policy or certificate of insurance.
b. “Viaticalsettlementcontract”includesapremiumfinanceloanmadeforalifeinsurance
policy by a lender to a viator on, before, or after the date of issuance of the policy where any
of the following applies:
(1) The viator or the insured receives on the date of the premium finance loan a guarantee
of a future viatical settlement value of the policy.
(2) The viator or the insured agrees on the date of the premium finance loan to sell the
policy or any portion of its death benefit on any date following the issuance of the policy.
c. “Viatical settlement contract” also includes the transfer for compensation or value of
ownership or beneficial interest in a trust or other entity that owns a life insurance policy if
the trust or other entity was formed or availed of for the principal purpose of acquiring one or
more life insurance policies, which life insurance policy insures the life of a person residing
in this state.
d. “Viatical settlement contract” does not include any of the following:
(1) A policy loan or accelerated death benefit made by the insurer pursuant to the policy’s
terms.
(2) Loan proceeds that are used solely to pay any of the following:
(a) Premiums for the policy.
(b) The costs of the loan, including, without limitation, interest, arrangement fees,
utilization fees and similar fees, closing costs, legal fees and expenses, trustee fees and
expenses, and third-party collateral provider fees and expenses, including fees payable to
letter of credit issuers.
(3) A loan made by a bank or other licensed financial institution in which the lender takes
aninterestinalifeinsurancepolicysolelytosecurerepaymentofaloanor, ifthereisadefault
on the loan and the policy is transferred, the transfer of such a policy by the lender, provided
that neither the default itself nor the transfer of the policy in connection with such default is
pursuant to an agreement or understanding with any other person for the purpose of evading
regulation under this chapter.
(4) Aloanmadebyalenderthatdoesnotviolateinsurancepremiumfinancelaw,provided
that the premium finance loan is not described in paragraph “b”.
(5) An agreement where all the parties are closely related to the insured by blood or law;
have a lawful substantial economic interest in the continued life, health, and bodily safety of
the person insured; or are trusts established primarily for the benefit of such parties.
(6) Any designation, consent, or agreement by an insured who is an employee of an
employer in connection with the purchase by the employer, or trust established by the
employer, of life insurance on the life of the employee.
(7) A bona fide business succession planning arrangement between one or more of the
following:
(a) Shareholders in a corporation or between a corporation and one or more of its
shareholders or one or more trusts established by its shareholders.
(b) Partners in a partnership or between a partnership and one or more of its partners or
one or more trusts established by its partners.
(c) Members in a limited liability company or between a limited liability company and one
or more of its members or one or more trusts established by its members.
(8) An agreement entered into by a service recipient, or a trust established by the service
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recipient, and a service provider, or a trust established by the service provider, who performs
significant services for the service recipient’s trade or business.
(9) Any other contract, transaction, or arrangement exempted from the definition of
viatical settlement contract by the commissioner based on a determination that the contract,
transaction, or arrangement is not of the type intended to be regulated by this chapter.
16. a. “Viatical settlement provider” means a person, other than a viator, that enters into
or effectuates a viatical settlement contract with a viator resident in this state.
b. “Viatical settlement provider” does not include any of the following:
(1) A bank, savings bank, savings and loan association, credit union, or other licensed
lending institution that takes an assignment of a life insurance policy solely as collateral for
a loan.
(2) The issuer of the life insurance policy.
(3) Anauthorizedoreligibleinsurerthatprovidesstop-losscoverageorfinancialguaranty
insurance to a viatical settlement provider, purchaser, financing entity, special purpose entity,
or related provider trust.
(4) A natural person who enters into or effectuates no more than one agreement in a
calendar year for the transfer of life insurance policies for any value less than the expected
death benefit.
(5) A financing entity.
(6) A special purpose entity.
(7) A related provider trust.
(8) A viatical settlement purchaser.
(9) Any other person that the commissioner determines is not the type of person intended
to be covered by the definition of viatical settlement provider.
17. a. “Viatical settlement purchaser” means a person who provides a sum of money as
consideration for a life insurance policy or an interest in the death benefits of a life insurance
policy, or a person who owns or acquires or is entitled to a beneficial interest in a trust that
owns a viatical settlement contract or is the beneficiary of a life insurance policy that has
been or will be the subject of a viatical settlement contract, for the purpose of deriving an
economic benefit.
b. “Viatical settlement purchaser” does not include any of the following:
(1) A licensee under this chapter.
(2) An accredited investor or qualified institutional buyer as defined, respectively, in 17
C.F.R. §230.501(a) or 17 C.F.R. §230.144A as promulgated by the United States securities and
exchange commission under the federal Securities Act of 1933, as amended, 15 U.S.C. §77a
et seq.
(3) A financing entity.
(4) A special purpose entity.
(5) A related provider trust.
18. “Viaticated policy” means a life insurance policy or certificate that has been acquired
by a viatical settlement provider pursuant to a viatical settlement contract.
19. a. “Viator” means the owner of a life insurance policy or a certificate holder under a
group policy who resides in this state and enters or seeks to enter into a viatical settlement
contract. “Viator” includes but is not limited to an owner of a life insurance policy or a
certificate holder under a group policy insuring the life of an individual with a terminal or
chronic illness or condition except where specifically addressed. If there is more than one
viator on a single policy and the viators are residents of different states, the transaction
shall be governed by the law of the state in which the viator having the largest percentage
ownership resides or, if the viators hold equal ownership, the state of residence of one viator
agreed upon in writing by all the viators.
b. “Viator” does not include any of the following:
(1) A licensee under this chapter, including a life insurance producer acting as a viatical
settlement broker pursuant to this chapter.
(2) A qualified institutional buyer as defined in 17 C.F.R. §230.144-144A as promulgated
by the United States securities and exchange commission under the federal Securities Act of
1933, as amended, 15 U.S.C. §77a et seq.
§508E.2, VIATICAL SETTLEMENT CONTRACTS 6
(3) A financing entity.
(4) A special purpose entity.
(5) A related provider trust.