On August 28, 2008, the Florida Office of Insurance Regulation and its Commissioner, Kevin McCarty, hosted a public hearing on stranger-owned life insurance (“STOLI”). STOLI, as discussed in these posts here at InsureReinsure, is a controversial type of life settlement transaction in which a policyholder receives cash compensation or other forms of consideration in exchange for taking out a life policy and transferring the policy or death benefit to a third party investor. In Florida, regulators are particularly concerned because third party investors are enticing seniors to buy life insurance policies by offering cash or financing of premiums. Seniors are receiving free insurance or cash for the life insurance policies, but the investors are the beneficiaries of the policies. Critics say that STOLI is financially risky for policyholders and give investors a stake in when policyholders die. Proponents say that STOLI can be a valuable resource, especially for those who are terminally ill and need money to pay medical bills. While some states have adopted laws, including those based on the NCOIL model act that specifically prohibit STOLI transactions, Florida has not yet done so. Commissioner McCarty stated in a press report that regulators are gathering information and may make a recommendation to lawmakers next year. We will update this post with any important developments related to this hearing.
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