As the insurance industry and regulators are making headway dealing with stranger-originated life insurance transactions (STOLI), a new threat known as stranger-originated annuity transactions (STAT) is emerging.
The National Association of Insurance and Financial Advisors (NAIFA) has voted to adopt a new policy opposing STATs, and the National Association of Insurance Commissioners will hold a public hearing on STATs in Washington on May 20.
"Based upon the limited information available, STATs seem to share some of the same troublesome characteristics as STOLIs," NAIFA President Thomas Currey said in a statement. "Most significantly, in both situations the transaction is initiated for the benefit of an investor who has no relation to the person whose life the insurance policy or annuity is based upon, and once the transaction is completed, neither the insured nor his or her beneficiaries will have any further interest in the policy or annuity's benefits. Much like with a STOLI transaction, it appears that a STAT is usually not being initiated for a typical or historically legitimate insurance purpose."
In a STAT, an unrelated investor is the purchaser and owner of a variable annuity that is purchased on the life of a terminally ill person, who receives an up-front payment.
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