Washington, D.C. (October 7, 2011) — The American Council of Life Insurers (ACLI) called on the Securities and Exchange Commission (SEC) to prohibit the securitization of life settlements and support changes to clarify the application of federal securities laws to viatical and life settlement transactions. These and other comments were included in a letter to the SEC responding to the recommendations made in the July 22, 2010 report by SEC staff on life settlements. 

ACLI supports a prohibition on securitization because the practice exposes senior citizens and investors to increased risk of fraud. Moreover, ACLI is concerned securitization will increase occurrences of illegal stranger-originated life insurance (STOLI) transactions. In STOLI transactions, investors or middlemen approach seniors and encourage them to purchase life insurance policies they otherwise would not buy solely to sell the policies to investors. Seniors caught up in STOLI schemes face potential legal and tax liability.

ACLI’s public policy position on life settlement securitization is included in an appendix to the SEC letter. ACLI’s position states, in part:

“Securitization of life settlements will exacerbate the STOLI problem. Securitization is a  very effective means of market-making and encouraging rapid expansion of a ‘product’, in  this case, life settlement contracts. Promoters will use capital generated from  securitization to create larger inventories of life settlement contracts which, in turn, will fuel  more securitizations and more STOLI.”

ACLI's letter to the SEC is available at www.acli.com.

The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with more than 300 legal reserve life insurer and fraternal benefit society member companies operating in the United States. ACLI members represent more than 90 percent of the assets and premiums of the life insurance and annuity industry. In addition to life insurance and annuities, ACLI member companies offer pensions, 401(k) and other retirement plans, long-term care and disability income insurance, and reinsurance. ACLI's public Web site can be accessed at www.acli.com.