September 9, 2009

Letters Editor
The New York Times
229 West 43rd Street
New York, NY 10036-3959

To the Letters Editor:

Securitization of life insurance policies transferred to third-parties is not necessarily a bad thing. (“Wall Street Pursues Profit in Bundles of Life Insurance,” Sept. 6, 2009.) But these investments can turn bad unless consumers purchased the policies in good faith and with a legitimate insurable interest present at the time of issue.

Life insurers’ concern is with fraudulent transactions in which policies are purchased solely for the purpose of reselling them to investors, called stranger-originated life insurance (STOLI). A high probability exists that in order to create a sufficient inventory of policies to make securitization economically feasible, seniors will be induced to participate in STOLI fraud.

If STOLI-related policies are included in investment packages and these policies are later rescinded for lack of an insurable interest, the harm to investors could be significant.

Legislation to combat STOLI and establish new consumer protections—based on proposals developed by the National Association of Insurance Commissioners and National Conference of Insurance Legislators—has been enacted in 25 states and is pending in 14 others. Insurers will continue to work for the strongest possible legislation in every jurisdiction.

Sincerely,

Frank Keating

Frank Keating is President of the American Council of Life Insurers. He is also a former two-term Oklahoma governor.