On May 13, 2010, Wisconsin Governor Jim Doyle signed into law Senate Bill 513 (“SB 513”) governing life settlements. SB 513 is a hybrid of the NAIC Viatical Settlements Model Act and the NCOIL Life Settlements Model Act, and includes a requirement that life insurance policies be in force for at least 5 years before they can be sold in the secondary market. There are exceptions to this requirement, such as in the case of a critical illness. The 5 year requirement has the effect of hindering stranger originated life insurance transactions (commonly referred to as STOLI transactions).

In addition to the 5 year requirement, SB 513 also:

  1. Requires that life settlement providers and brokers obtain licenses from the insurance commissioner;
  2. Imposes anti-fraud provisions, including creation of antifraud programs by brokers;
  3. Requires that the amount paid in a life settlement transaction be less than the death benefit, but more than the cash surrender value;
  4. Requires that providers and brokers provide policy owners selling policies with certain disclosures, including disclosure of the broker’s compensation;
  5. Requires disclosure to life settlement purchasers of the qualifications of the person determining the life expectancy of the insured person; and
  6. Requires life settlement providers to send written notices to insurers of the life settlements within 20 days of the owners’ agreement to sell the applicable policies.

Click here for a copy of SB 513.