Michael Abraham

National Underwriter Life and Health

By: Trevor Thomas

The Wisconsin Senate Tuesday unanimously passed a bill requiring life insurance policies to be in force at least 5 years before consumers can sell the policies through a settlement. The bill, S.B. 513, would change an older law that has permitted consumers to sell policies after holding the policies for 2 years.

Commentary by Michael Abraham:

Here again restricting consumer choice because the regulators and the life offices will not properly monitor the applications for life insurance and act accordingly!

http://www.lifeandhealthinsurancenews.com/News/2010/2/Pages/Wisconsin-Senate-Approves-Settlement-Bill.aspx

InvestmentNews

By: Darla Mercado

State insurance regulators Monday voted in favor of a proposal that would allow carriers to terminate an annuity living or death benefit if a client sold the contract over the secondary market.

The management committee and full commission of the Interstate Insurance Product Regulation Commission, a group that’s affiliated with the National Association of Insurance Commissioners, voted in favor of a uniform set of additional standards for guaranteed living and death benefits that are attached to individual deferred annuities.

Some 36 jurisdictions, including Puerto Rico, comprise the IIPRC. Thirty regulators took part in the full commission vote on Monday. Only Indiana voted against the proposal.

Commentary by Michael Abraham:

Can someone please tell me the logic of this – it hardly enhances customer choice and yet again returns power to  the few?

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20100223/FREE/100229964/1139/RETIREMENT

The Journal Times

By: State Sen. John Lehman Racine

Years ago there was a popular television game show called “You Bet Your Life.” Today, unscrupulous scam artists are playing an updated version with a financial scheme targeting seniors, the severely ill and investors using “stranger-originated life insurance.” But instead of fabulous prizes and vacations, victims are left with parting gifts like unexpected tax liabilities, legal bills and problems purchasing life insurance.

The scam is based on “viatical” life insurance transactions. Created to help gravely ill individuals, these agreements allow people to cash in their life insurance policies before the date of maturity and use the funds to cover medical bills or health insurance costs.

Commentary by Michael Abraham:

The sooner all states outlaw STOLI the better it will be for all!

http://www.journaltimes.com/news/opinion/editorial/article_e4a787fc-1a85-11df-a7bd-001cc4c002e0.html

Insurance and Financial Advisor

By: Bob Graham

A new policy statement from a life insurers’ group, suggesting that the securitization of life settlements needs to be regulated, has sparked a sharp response from a life settlement trade group.

The American Council of Life Insurers (ACLI), representing nearly 300 companies providing life insurance, recommended that the securitization of life settlements “be prohibited by legislation or regulation.”

http://ifawebnews.com/2010/02/09/life-insurers-life-settlement-group-spar-over-securitization/

National Underwriter Life and Health

By: Trevor Thomas

A life settlement think tank is defending the value of the life settlement securitization concept.

The American Council of Life Insurers, Washington, asked Feb. 3 for policymakers to ban the securitization of life insurance policies sold in the secondary market. Packaging pools of life settlement transactions to back securities encourages stranger-originated life insurance and other forms of fraud, the ACLI says.

http://www.lifeandhealthinsurancenews.com/News/2010/2/Pages/ISI-Defends-Life-PolicyBacked-Securities-Market.aspx

The Wall Street Journal

By: Leslie Scism and Larry Light

2/6/2010

Death is inevitable, but good investment returns aren’t—especially those that rest on how long people live.

The increasingly popular practice of buying rights to older people’s life insurance is risky, even downright perilous. People are living longer than actuarial tables say they should, and that is a problem, at least for the investor. Adding to the danger are a recent adverse tax ruling and some scam artists on the edges of the industry.

Commentary by Michael Abraham:

Don’t you find it depressing that even the ‘serious’ papers resort to such gimmicky and misleading headlines like their counterparts in the tabloids!  The article itself is not worthy of comment.

http://online.wsj.com/article/SB10001424052748704094304575029581062228168.html?mod=rss_Today’s_Most_Popular

American Chronicle

By: Amy Gavartin

ADVISERS ARE CONSTANTLY LOOKING FOR ways to supplement the depleted finances of their clients. For seniors, one option that has become more popular is the secondary market for life insurance or life settlements. Several articles have recently been published on this topic, and many have tried to portray this industry as the “next subprime crisis” waiting to happen but gloss over the underlying fact that the use of life settlements has uncovered vast amounts of hidden value from existing life insurance policies. Over the past 10 years, owners of life insurance policies who have chosen to sell have received approximately $6-7 billion more than their cash surrender value (CSV) (Thomas, “LISA Pans Article,” Life and Health Insurance News (September 14, 2009). It is not uncommon for the settlement amount to be three to five times the CSV, and the policy owner is relieved of all future premium payments on the policy. All types of policies are eligible for a life settlement, including term, universal life, whole life, variable universal, and second-to-die policies. The general rule of thumb in today’s market is that the insured should be over age 70 with a minimum of $250,000 of insurance.

Commentary by Michael Abraham:

An article which balances some of the nonsense spouted by such as Peter Smith of the UK FSA!

http://www.americanchronicle.com/articles/yb/140953387

National Underwriter Life and Health

By: Trevor Thomas

Several life settlement organizations have reacted strongly to the American Council of Life Insurers’ recent statement calling for a ban on the securitization of life settlements.

“Once again. ACLI has chosen to mix apples and oranges when condemning the life settlement market,” said Jack Kelly, director of government affairs for the Institutional Life Markets Association, Washington. He was responding to a policy statement from the ACLI, Washington, holding that the securitizations of life insurance settlements should be prohibited by legislation and regulation.

Commentary by Michael Abraham:

Great how good it is to hear of the comments of Jack Kelly.  Let’s hope there are a lot more such people in government affairs who will stand up and be counted!

http://www.lifeandhealthinsurancenews.com/News/2010/2/Pages/Settlement-Execs-Blast-ACLI-Comment.aspx

I was reading an article the other day about Deutsche Bank written by Donna Horowitz.  In it one paragraph states ‘Once Deutsche Bank realized it was going to have a hard time finding enough policies and the policy payouts extended past the 10 year term, the bank should have wound up the fund and returned the money to investors, the investor said.’

How interesting is that – ‘hard time finding enough policies’ – this commentator has for some time believed the massive hype abut securitizations of billions of dollars of policies to be just that ‘HYPE’.

The market that one needs to access to fill such mammoth vehicles is, as I call them, the ‘healthy wealthy’s’ – the top 3 to 5% of the country who can afford policies with high face values.  But there are just not enough of them who will be willing to sell.  This is what led Deutsche to buying ‘wet paper’, even risking the STOLI market.  It’s not just that they need policies, they need big policies and there are not as many of those about as the hype would have you believe.  The real meat of the market comes way down the scale, probably with a face value average below $500K, not $5M.

So in this commentator’s view – nonsense!

InvestmentNews

By: Darla Mercado

The American Council of Life Insurers is asking policymakers to bar the securitization of life settlements.  The group said yesterday that securitization would encourage promoters — keen on developing a secondary market — to entice seniors to sell their life insurance policies, even when it’s not in their best interests to do so.

Commenary by Michael Abraham:

While I am not a particular fan of the trend towards securitization this statement from the ACL is in my opinion plain ridiculous.  Having just been involved in the development of an infomercial and been party to the legal opinions on the risk warnings it seems to me that before you can entice seniors you will have already informed them on more than one occasion of the reasons for not being enticed. It also somewhat belittling to think that people above the age of 65should be thought of as such sad cases.  It is  much sadder to see these same people paying premiums to the members of ACL when they have no need to.  As usual it is ‘do as I say not as I do’ – hypocrites!

http://technorati.com/business/finance/article/ten-life-settlement-industry-predictions-for/