A position paper by the American Council of Life Insurers (ACLI) asking legislators to ban securitization of life settlements is eliciting some heated responses. The paper contends that securitization of life settlements presents dangers to the insured public and to the investors who buy the securities.
“Securitization may encourage promoters of these packages to prey upon senior citizens urging seniors to settle their life insurance policies even if a settlement is not in their economic best interests,” the ACLI paper states. “Insurers are also concerned about public policy implications of stranger-originated life insurance (STOLI), where promoters of life settlements induce seniors to buy life insurance policies that they would not otherwise purchase in anticipation of profit from the sale of the policy to investors at the end of the policy contestability period.”
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