Life insurance: contracts and viatical settlements.

Existing law establishes when an interest, with respect to life and disability insurance, is insurable. This bill would provide that trusts and special purpose entities, as specified, where one or more beneficiaries of these trusts or special purpose entities do not have an insurable interest in the life of the insured, violate the insurable interest laws and the prohibition against wagering on life. The bill would also provide that any device, scheme, or artifice designed to give the appearance of an insurable interest, where there is no insurable interest, violates the insurable interest laws. Existing law defines "viatical settlement," as specified, and requires life and disability agents, among others, to file a declaration with the Insurance Commissioner that their agent license is valid and in good standing in order to engage in the business of viatical settlements. The commissioner may suspend the agent's ability to transact viatical settlements if this requirement is not complied with. A person who enters into or solicits a viatical settlement without a license, or a licensee who fails to comply with certain requirements, is guilty of a misdemeanor. This bill would repeal these provisions, and would instead revise and recast the law relating to viatical settlements to define those and other specified financial arrangements as "life settlements," as defined. The bill would prohibit a person from entering into, brokering, or soliciting life settlements unless that person holds a license, issued by the commissioner, to so act. The bill would specify the requirements to obtain a life settlement license, and would specify, among other things, disclosure requirements that must be complied with at the time of the solicitation of the life settlement contract. The bill would also provide that the insurance carrier may require a specified certification from the applicant. The bill would contain various other regulatory provisions relating to life settlement contracts, including provisions relating to the confidentiality of the insured's medical and financial information, and of the annual statements of life settlement licensees, as specified. This bill would also provide that applicable license fees shall be established by the commissioner. Because a violation of any of these provisions would be a misdemeanor, the bill would define new crimes and thereby impose a state-mandated local program. This bill would provide that the adoption or amendment of any regulation required by specific provisions shall take effect when filed with the Office of Administrative Law, as specified. This bill would provide that, with certain exceptions, it shall not apply to any life settlement contract entered into on or before July 1, 2010. This bill would provide that it would apply to any transaction involving any life insurance policy in effect, or entered into, on or after the operative date of the bill. This bill would make legislative findings and declarations relating to the need for confidentiality of specified information. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.