On August 24, 2007, the Florida Office of Insurance Regulation (OIR) published a notice that it intends to develop a new rule that would require viatical settlement providers and brokers to make detailed and comprehensive disclosures to viators regarding the terms of the offer and the compensation to be paid to brokers in viatical and life settlement transactions. A viator is an owner of a life insurance policy who sells the policy to an investment company, known as a viatical or life settlement provider, for a purchase price that is greater than the cash surrender value of the policy. A broker acts as the agent of a viator in a viatical or life settlement transaction. Viatical and life settlements are regulated by OIR pursuant to Florida Statutes Part X, Chapter 626.
Under the preliminary text of the proposed rule, to be numbered 69O-204.101, Florida Administrative Code, a viatical settlement provider would be required to give a disclosure statement to a viator and obtain the viator's signature on the statement prior to the viator's execution of a viatical settlement contract. The disclosure statement would be required to include the following:
- The name of each viatical settlement broker who receives compensation and the amount of compensation received by that broker. As used in this rule, the term "compensation" would include anything of value paid or given to the viatical settlement broker in connection with the viatical settlement contract.
- A complete reconciliation of the gross offer or bid by the viatical settlement provider to the net amount of proceeds or value to be received by the viator. As used in this rule, the term "gross offer or bid" would mean the total amount or value offered by the viatical settlement provider for the purchase of one or more life insurance policies, inclusive of commissions, fees, or other expenditures related to the viatical settlement transaction.
A viatical settlement provider would have to give the viator an amended disclosure statement if anything changed regarding the broker compensation or gross offer or bid. The amended disclosure statement would have to identify clearly any information that changed from the preceding disclosure statement. The viator's signature also would be required for the amended disclosure statement.
In addition to requiring the viator's signature on the disclosure statement, the preliminary text of the proposed rule indicates that the viatical settlement provider also may be required to obtain the signature of any brokers who receive compensation in connection with the viatical settlement transaction.
Although viatical settlement brokers have been required since 1999 to disclose their compensation to viators pursuant to Florida Statutes Section 626.99181 OIR has not required a particular form to be provided for that disclosure, and the obligation is not placed directly on the viatical settlement provider to ensure that the disclosure has been made by the broker. The disclosure requirements of the proposed rule appear to be aimed at preventing certain practices that OIR has characterized as "fraudulent or dishonest." The preliminary text of the proposed rule contains requirements that are similar to the new disclosure requirements of the amendments to the Viatical Settlements Model Act adopted by the National Association of Insurance Commissioners in June 2007.
OIR scheduled a workshop on September 11, 2007 in Tallahassee, Florida to receive public comment regarding the development of proposed rule 69O-204.101. If you have any questions regarding this proposed rule development, please contact Wes Strickland.
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