§ 7802 — Definitions

New York § 7802

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 78: Life Settlements

Text

§ 7802. Definitions. In this article:\n (a) "Accredited investors" shall be as defined in regulation D, rule\n501 of the Federal Securities Act of 1933, as amended.\n (b) "Advertisement" means any written, electronic or printed\ncommunication or any communication by means of recorded telephone\nmessages or transmitted on radio, television, the Internet or similar\ncommunications media, including film strips, motion pictures and videos,\npublished, disseminated, circulated or placed before the public,\ndirectly or indirectly, for the purpose of creating an interest in or\ninducing a person to purchase, sell, assign, devise, bequest or transfer\nthe death benefit or ownership of, a life insurance policy or an\ninterest in a life insurance policy pursuant to a life settlement\ncontract.\n (c)(1) "Business of life settlements" means an activity involving, but\nnot limited to, offering to enter into, soliciting, negotiating,\nprocuring, effectuating, monitoring, or tracking life settlement\ncontracts.\n (2) For purposes of this article, "business of life settlements" shall\nalso include:\n (A) such acts or transactions effectuated in this state by mail or\notherwise from outside this state; and\n (B) doing or proposing to do any business in substance equivalent to\nthe business of life settlements in a manner designed to evade the\nprovisions of this chapter.\n (d) "Compensation" means anything of value, including money, credits,\nloans, interest on premium, forgiveness of principal or interest,\nvacations, prizes, gifts or the payment of employee salaries or\nexpenses, whether paid as commission or otherwise.\n (e) "Financing entity" means an accredited investor:\n (1) whose principal activity in connection with the transaction is\nproviding funds to effect the life settlement contract or to purchase\none or more policies; and\n (2) who has an agreement in writing with a life settlement provider to\nfinance the acquisition of a life settlement contract.\n (f) "Financing transaction" means a transaction in which a licensed\nlife settlement provider obtains financing from a financing entity,\nincluding any secured or unsecured financing, any securitization\ntransaction, or any securities offering which is registered or exempt\nfrom registration under federal and state securities laws.\n (g) "Insured" means a person covered under a policy that is or may be\nthe subject of a life settlement contract.\n (h) "Insurer" means a life insurance company or a fraternal benefit\nsociety.\n (i) "Life expectancy" means the arithmetic mean of the number of\nmonths the insured can be expected to live taking into consideration\nmedical records and appropriate experiential data.\n (j) "Life settlement broker" means a person who, for compensation,\nsolicits, negotiates or offers to negotiate a life settlement contract;\nexcept that such term shall not include a licensed life settlement\nprovider, or representative thereof, licensed attorney at law, certified\npublic accountant, or financial planner that is accredited by a\nnationally recognized accreditation agency acceptable to the\nsuperintendent, who is retained in his or her professional capacity,\ndoes not advertise as being in the business of life settlements and is\ncompensated without regard to whether a life settlement contract is\neffectuated.\n (k)(1) "Life settlement contract" means an agreement establishing the\nterms under which compensation is provided to an owner, which\ncompensation is less than the expected death benefit of the policy, in\nreturn for the assignment, transfer, sale, release, devise or bequest of\nany portion of:\n (A) the death benefit;\n (B) the ownership of the policy; or\n (C) any beneficial interest in the policy, or in a trust or any other\nentity that owns the policy, where a primary purpose of the transaction\nis to acquire the policy.\n (2) "Life settlement contract" shall include an agreement, entered\ninto after the effective date of this article, described in paragraph\none of this subsection regardless of the date the compensation is\nprovided and regardless of the date the assignment, transfer, sale,\ndevise or bequest is effectuated.\n (3) "Life settlement contract" shall not include:\n (A) an assignment of a policy as collateral for a loan by any\ndepository institution insured by the Federal Deposit Insurance\nCorporation or the National Credit Union Administration;\n (B) an assignment of a policy as collateral for a loan made by a\nlicensed financial institution under which the lender takes an interest\nin a life insurance policy solely to secure repayment of a loan or, if\nthere is a default on the loan and the policy is transferred, the\ntransfer of the policy by the lender, provided that the default itself\nis not pursuant to an agreement or understanding with any other person\nfor the purpose of evading regulation under this article;\n (C) an assignment of a policy as collateral for a loan made by a\nlender that does not violate article twelve-B of the banking law;\n (D) the making of a policy loan, or the paying of surrender benefits\nor other benefits, by the issuer of a policy with respect to that\npolicy;\n (E) an exchange of life insurance policies in a transaction described\nby section 1035 of the Internal Revenue Code of 1986, as amended;\n (F) an agreement made by an individual to take an assignment,\npurchase, or otherwise receive the death benefit or ownership of any\nportion of a policy or policies on the life of a single insured or lives\nof joint insureds; provided that, in a calendar year, the individual\nenters into no other agreement to take an assignment, purchase, or\notherwise receive the death benefit or ownership of any portion of a\npolicy or policies on the life of any other insured or lives of any\nother joint insureds;\n (G) an agreement to assign, transfer or pledge a settled policy, or\nany interest therein, to a licensed life settlement provider, an\naccredited investor or qualified institutional buyer, financing entity,\nspecial purpose entity, or related provider trust;\n (H) an agreement where all the parties are closely related to the\ninsured by blood or law or have a lawful substantial economic interest\nin the continued life, health and bodily safety of the person insured,\nor are trusts established primarily for the benefit of such parties;\n (I) any designation, consent or agreement by an insured who is an\nemployee of an employer in connection with the purchase by the employer,\nor trust established by the employer, of life insurance on the life of\nthe employee;\n (J) a bona fide business succession planning arrangement between:\n (i) one or more shareholders in a corporation or between a corporation\nand one or more of its shareholders or one or more trusts established by\nits shareholders;\n (ii) one or more partners in a partnership or between a partnership\nand one or more of its partners or one or more trusts established by its\npartners; or\n (iii) one or more members in a limited liability company or between a\nlimited liability company and one or more of its members or one or more\ntrusts established by its members;\n (K) legitimate corporate or pension benefit plans, as determined by\nthe superintendent; or\n (L) any other agreement that the superintendent determines is\nsubstantially similar to any of the foregoing.\n (l) "Life settlement intermediary" means a person who maintains an\nelectronic or other facility or system, for the disclosure, through a\nforum of offers and counteroffers, to sell or purchase a policy pursuant\nto a life settlement contract; and delivers to:\n (1) a life settlement provider an offer from a life settlement broker\nor owner to sell a policy; or\n (2) an owner or life settlement broker an offer from a life settlement\nprovider to purchase a policy.\n (m) "Life settlement provider" means a person who enters, or offers to\nenter, into a life settlement contract with the owner.\n (n) "Owner" means the owner of a policy who enters or seeks to enter\ninto a life settlement contract.\n (o) "Person" means any natural person or legal entity, including a\npartnership, limited liability company, association, trust or\ncorporation.\n (p) "Policy" means an individual or group life insurance policy or\ncertificate.\n (q) "Premium finance loan" means a loan made for the purposes of\nmaking premium payments on a life insurance policy, which loan is\nsecured by an interest in such life insurance policy.\n (r) "Qualified institutional buyer" shall be as defined in rule 144A\nof the Federal Securities Act of 1933, as amended.\n (s) "Related provider trust" means a trust established by a licensed\nlife settlement provider or a financing entity for the sole purpose of\nholding the ownership or beneficial interest in settled policies in\nconnection with a financing transaction; provided that the trust has a\nwritten agreement with the licensed life settlement provider under\nwhich:\n (1) the licensed life settlement provider is responsible for ensuring\ncompliance with all statutory and regulatory requirements; and\n (2) the trust agrees to make all records and files relating to life\nsettlement transactions available to the superintendent as if those\nrecords and files were maintained directly by the licensed life\nsettlement provider.\n (t) "Settled policy" means a policy that at any time has been acquired\nby a life settlement provider pursuant to a life settlement contract.\n (u) "Special purpose entity" means a corporation, partnership, trust,\nlimited liability company, or other legal entity formed solely to\nprovide, either directly or indirectly, access to institutional capital\nmarkets for a financing entity or licensed life settlement provider.\n