科技部補助專題研究計畫成果報告
期末報告
保險單貼現商品之定性及其最適化監理法規之研究
計 畫 類 別 ： 個別型計畫 計 畫 編 號 ： NSC 102-2410-H-004-095- 執 行 期 間 ： 102 年 08 月 01 日至 103 年 07 月 31 日 執 行 單 位 ： 國立政治大學法律學系 計 畫 主 持 人 ： 張冠群 計畫參與人員： 碩士班研究生-兼任助理人員：王莉宸 報 告 附 件 ： 出席國際會議研究心得報告及發表論文 處 理 方 式 ： 1.公開資訊：本計畫涉及專利或其他智慧財產權，2 年後可公開查詢 2.「本研究」是否已有嚴重損及公共利益之發現：否 3.「本報告」是否建議提供政府單位施政參考：是，金融監督管理委員會中 華 民 國 103 年 10 月 28 日
中 文 摘 要 ： 二○一一年，國內上千名投資人因購買美國「保單貼現」產 品，因為數不少之美國保單貼現公司於金融海嘯中倒閉，致 投資人投資慘遭套牢虧損，估計金額將近二億美元（約五十 七億台幣），茲因「保單貼現」屬於境外金融商品，非屬金 融監督管理委員會監理權責範圍，縱投資人欲集體跨海求 償，金管會亦無權發動措施協助投資人。此一事件凸顯保險 單貼現商品之相關法律問題，含其性質究屬保險亦或證券商 品、其應適用之監理法規及監理機關等問題之釐清與解決， 刻不容緩。 所謂保險單貼現乃指罹患慢性病或重症末期之患者，同時亦 為人壽保險契約之被保險人者，得出售其保險單予投資人， 由投資人依約定之保險金額若干折讓成數給付金錢予被保險 人，而俟被保險人死亡時，投資人即得向保險人請求保險 金，獲取保險金與其購買保險單價金間之差價。 保單貼現型商品初始縱立意良善，仍不免有道德爭議、被保 險人與保險單貼現提供者間締約地位不平等、詐欺、原受益 人權利保護及保險單貼現商品之投資人保障等衍生問題。由 此所生者，乃其應適用之監理法規即應由何監理官監管等問 題。 本研究首擬就保險單貼現商品性質為確定，蓋唯就該商品為 定性，始得判斷何為最適化之監理架構即應適用之監理法 規，關於此部分，保險單貼現商品發源地之美國及歐洲保險 中心之英國法規制度將為本研究考察與比較參採之對象。進 而再就可用為規範與監理工具法規是否得於保險單貼現商品 之規範與監管適用無礙，亦或有應增應修處為探討。本研究 終局目的，乃針對我國關於保險單貼現商品監理法規提出具 體修訂建議。 中文關鍵詞： 保單貼現，保險監理
英 文 摘 要 ： In 2011, thousands of investors of American viatical settlements suffered from tremendous losses due to the bankruptcy of viatical settlement providers during the financial crisis. Viatical settlements, categorized as oversea financial products according to the Taiwanese law, are virtually unregulated. Hence the Financial Service Commission has neither the authority to either supervise firms selling the
viatical settlement, nor does it capable of assisting investors to file claims against oversea viatical settlement providers. Such awkward situation reveals unsettled issues regarding the regulation of viatical settlements including the nature of viatical
settlements and the appropriate regulatory scheme. A viatical settlement is an investment contract
pursuant to which an investor acquires an interest in the life insurance policy of a terminally ill person, originally an AIDS victim, at a discount of 20 to 40 percent, depending upon the insured｀s life
expectancy. When the insured dies, the investor receives the benefit of the insurance. The
investor｀s profit is the difference between the discounted purchase price paid to the insured and the death benefit collected from the insurer, less
transaction costs, premiums paid, and other administrative expenses.
Although the original purpose of the viatical settlements is undoubted positive, several issues associated with such product need to be addressed. These issues include the ethical issue (lack of insurable interest), the imbalance of bargaining power between the viator and viatical settlement providers, the fraud among participants, the
protection of the interests of the beneficiaries in the original policy, and the protection of investors. To begin with, this research project attempts to identify the nature of the viatical settlements. It is the notion of this research that only after the nature of such product is ascertained can applicable laws and regulations be determined. The method of comparative law studies will be adopted to facilitate this part of the research. Laws and regulations of the U.S. and U.K. will be introduced and discussed. The ultimate goal of this research is to, through comparing the system of various countries, propose an optimal regulatory system for viatical settlements in
Taiwan.
0
科技部補助專題研究計畫成果報告
（□期中進度報告/□
V期末報告）
（計畫名稱）
計畫類別：□
V個別型計畫 □整合型計畫
計畫編號：MOST 102 － 2410 －H － 004 － 095 －
執行期間： 102 年 8 月 日至 103 年 7 月 31 日
執行機構及系所：政治大學法律學系
計畫主持人：張冠群
共同主持人：
計畫參與人員：王莉宸
本計畫除繳交成果報告外，另含下列出國報告，共 _1_ 份：
□執行國際合作與移地研究心得報告
□
V出席國際學術會議心得報告
期末報告處理方式：
1. 公開方式：
□非列管計畫亦不具下列情形，立即公開查詢
□
V涉及專利或其他智慧財產權，□一年□
V二年後可公開查詢
2.「本研究」是否已有嚴重損及公共利益之發現：□否 □是
3.「本報告」是否建議提供政府單位施政參考 □否□
V是， 金融監督管理委
員會 （請列舉提供之單位；本部不經審議，依勾選逕予轉送）
中 華 民 國 103 年 10 月 22 日
1
目錄
壹、
中文摘要 ... 2
貳、
英文摘要 ... 2
参、報告內容 ... 4
一、前言 ... 4 二、研究目的 ... 6 三、 文獻探討 ... 7 (一) 國內文獻 ... 7 (二) 國外文獻 ... 7 (三) 國內外重要文獻評述 ... 8 四、 研究方法 ... 10 五、 結果與討論 ... 102
壹、 中文摘要
二○一一年，國內上千名投資人因購買美國「保單貼現」產品，因為數不 少之美國保單貼現公司於金融海嘯中倒閉，致投資人投資慘遭套牢虧損，估計金 額將近二億美元（約五十七億台幣），茲因「保單貼現」屬於境外金融商品，非 屬金融監督管理委員會監理權責範圍，縱投資人欲集體跨海求償，金管會亦無權 發動措施協助投資人。此一事件凸顯保險單貼現商品之相關法律問題，含其性質 究屬保險亦或證券商品、其應適用之監理法規及監理機關等問題之釐清與解決， 刻不容緩。 所謂保險單貼現乃指罹患慢性病或重症末期之患者，同時亦為人壽保險契 約之被保險人者，得出售其保險單予投資人，由投資人依約定之保險金額若干折 讓成數給付金錢予被保險人，而俟被保險人死亡時，投資人即得向保險人請求保 險金，獲取保險金與其購買保險單價金間之差價。 保單貼現型商品初始縱立意良善，仍不免有道德爭議、被保險人與保險單 貼現提供者間締約地位不平等、詐欺、原受益人權利保護及保險單貼現商品之投 資人保障等衍生問題。由此所生者，乃其應適用之監理法規即應由何監理官監管 等問題。 本研究首擬就保險單貼現商品性質為確定，蓋唯就該商品為定性，始得判 斷何為最適化之監理架構即應適用之監理法規，關於此部分，保險單貼現商品發 源地之美國及歐洲保險中心之英國法規制度將為本研究考察與比較參採之對象。 進而再就可用為規範與監理工具法規是否得於保險單貼現商品之規範與監管適 用無礙，亦或有應增應修處為探討。本研究終局目的，乃針對我國關於保險單貼 現商品監理法規提出具體修訂建議。貳、 英文摘要
In 2011, thousands of investors of American viatical settlements suffered from tremendous losses due to the bankruptcy of viatical settlement providers during the
3
financial crisis. Viatical settlements, categorized as oversea financial products according to the Taiwanese law, are virtually unregulated. Hence the Financial Service Commission has neither the authority to either supervise firms selling the viatical settlement, nor does it capable of assisting investors to file claims against oversea viatical settlement providers. Such awkward situation reveals unsettled issues regarding the regulation of viatical settlements including the nature of viatical settlements and the appropriate regulatory scheme.
A viatical settlement is an investment contract pursuant to which an investor acquires an interest in the life insurance policy of a terminally ill person, originally an AIDS victim, at a discount of 20 to 40 percent, depending upon the insured's life expectancy. When the insured dies, the investor receives the benefit of the insurance. The investor's profit is the difference between the discounted purchase price paid to the insured and the death benefit collected from the insurer, less transaction costs, premiums paid, and other administrative expenses.
Although the original purpose of the viatical settlements is undoubted positive, several issues associated with such product need to be addressed. These issues include the ethical issue (lack of insurable interest), the imbalance of bargaining power between the viator and viatical settlement providers, the fraud among participants, the protection of the interests of the beneficiaries in the original policy, and the protection of investors.
To begin with, this research project attempts to identify the nature of the viatical settlements. It is the notion of this research that only after the nature of such product is ascertained can applicable laws and regulations be determined. The method of
4
comparative law studies will be adopted to facilitate this part of the research. Laws and regulations of the U.S. and U.K. will be introduced and discussed.
The ultimate goal of this research is to, through comparing the system of various countries, propose an optimal regulatory system for viatical settlements in Taiwan.
参、報告內容
一、前言
二○一一年，國內驚傳上千名投資人因購買美國「保單貼現」產品，因為 數不少之美國保單貼現公司於金融海嘯中倒閉，致投資人投資慘遭套牢虧損，估 計金額將近二億美元（約五十七億台幣），茲因「保單貼現」屬於境外金融商品， 非屬金融監督管理委員會監理權責範圍，縱投資人欲集體跨海求償，金管會亦無 權發動措施協助投資人1 。此一事件凸顯保險單貼現商品之相關法律問題，含其 性質究屬保險亦或證券商品、其應適用之監理法規及監理機關等問題之釐清與解 決，刻不容緩。所謂保險單貼現(Viatical Settlement/Life Settlement)乃指罹患慢性病 或重症末期之患者，同時亦為人壽保險契約之被保險人者，得出售其保險單予投 資人，由投資人依約定之保險金額若干折讓成數給付金錢予被保險人，而俟被保 險人死亡時，投資人即得向保險人請求保險金，獲取保險金與其購買保險單價金 間之差價2 。此種交易濫觴於 1980 年代初期 AIDS 患者出售其保險單。其出現之 原因乃因 AIDS 病患面臨高額之醫療費用，急需現金支應，而其保險單有現金價 值卻無法支用，被保險人僅得眼見保險期間不段經過，或提前解約而獲解約金 (surrender value)之給付，然該解約金之金額輒遠小於保單本身之價值，故乃 有業者，即保單貼現提供者(Viatical Settlement Provider)購買或由保險經紀 人(Broker)仲介投資人購買該罹病被保險人之人壽保險單，而由買受人繼續繳交 保險費，使被保險人(即保單貼現者，Viator)可獲得較解約金為高之現金，以解 1 孫中英，投資美「保單貼現」 驚傳上千人套牢，擷取自： http://money.udn.com/wealth/storypage.jsp?f_ART_ID=238423#ixzz2GfEy3BWm (最終瀏覽日：2012 年 12 月 24 日)。 2
Anna D. Halechko, Viatical Settlements: The Need For Regulation to Preserve the Benefits While Protecting the Ill and the Elderly From Fraud, 42 Duq. L. Rev. 803, 804(2004).
5 決其經濟之困難，而投資人，則可預期短期內，其將因被保險人死亡而獲約定之 保險金額因之獲取高額利益3 。目前，該商品交易對象已擴及至以年長者、重症 末期患者及慢性病者為被保險人之人壽保險，並於美國五十州仍均得合法交易與 販售4 。 然關於保險單貼現交易，非無問題與爭議。其一，二○一二年美國哈佛大 學教授 Michael Sandel 於其新作“What Money Can’t Buy – The Moral Limits of Markets”一書中，對保險單貼現商品之道德性提出質疑，其認為保險單貼現 商品乃投資人以他人之死亡為賭博之投資型商品，已偏離保險之本質目的，亦逸 脫保險契約本要求「保險利益」存在，以防免道德風險，區隔風險理財商品與純 粹之賭博之目的5 ，使保險單貼現商品長久存在之道德上妥當性辯論，再被重視。 其二，被保險人與保單貼現提供者間往往存在締約地位之不平等，加以一般情形 下，被保險人欲出售保單時，多已為貧病交集，實無心力與十足判斷力與保單貼 現提供者就價金為充分磋商，更無力與多個保單貼現提供者進行比價，致其出售 價格可能遠低於保單實際價值6 。其三，保單貼現交易一旦完成，將損及原保險 契約之受益人權利，惟保單貼現提供者輒未就該事項告知被保險人7 。其四，蓋 保險單貼現商品之投資人為投資判斷之故，均可能閱覽被保險人之病歷與健康資 料，形成對被保險人隱私權之極大妨害8 。其五，保險單貼現交易中，存在許多 詐欺交易，其樣態包括：(1)保險代理人(Agent)或保單貼現提供者以達成保險單 貼現交易為目的，教唆罹病者隱匿自身健康狀況投保人壽保險，並於保險契約生 效後，旋即向該被保險人購買人壽保險單；及(2)被保險人為增加其保險單之出 售機率並提高售價，乃向保單貼現提供者謊稱較嚴重之及並或較差之健康狀況9 。 凡此，均係保險契約法解釋適用上或保險監理法規上亟需解決者。 自投資人端以言，近年保險單貼現商品，已漸變形，輒有以證券化商品 (securitization)，即由依保單貼現提供者將多個保單加以組合，再發行資產準 備證券(Asset-backed Securities)者10 。此一趨勢，令保險單貼現商品之監理亦 趨複雜，亦言之，其監理重心，除前述之被保險人與保單貼現提供者之間外，購 買保險單貼現商品之投資保護，將成保險單貼現市場健全運作之新興之監理課題。 然成問題者，此部份之規範，應歸何種法規之下？其發行保單貼現行證券化商品
3 Sachin Kohli, Pricing Death: Analyzing the Secondary Market for Life Insurance Policies and its
Regulatory Environment, 54 Buff. L. Rev. 279, 290(2006).
4
Life Insurance Settlement Association, State Document Report,
http://www.lisa.org/state-document-report.aspx ( last visited Dec. 21th 2012).
5 Michael Sandel, WHAT MONEY CAN’T BUY – THE MORAL LIMITS OF MARKETS 136-140
(2012).
6 Halechko, supra note1, at 806. 7
Joy D. Kosiewicz,, Death For Sale: A Call to Regulate the Viatical Settlement Industry, 48 Case W. Res. L. Rev. 701, 706 (1998).
8 Halechko, supra note1, at 806. 9
Id, at 810-812.
10
Eli Martin Lazarus, Viatical and Life Settlement Securitization: Risks and Proposed Regulation, 29 Yale L. & Pol'y Rev. 253, 270 (2010).
6 之監理機關為何？其發行審查機制為何？凡此，均至關重要。前揭我國投資人投 資境外保險單貼現商品之案例，足堪為此些監理課題重要性之佐證。 儘管保險單貼現商品衍生諸般法律與監理問題，仍有論者主張保單貼現商 品無需監理或僅需低度監理者，其主張無非認為過度之限制與監管，將使保單貼 現提供者失去誘因，而致市場崩解，反之，自由市場乃維繫交易公平性之最佳方 法11 。然本研究以為，自由市場中市場紀律功能之發揮，惟於資訊對稱及市場參 與者締約地位平等之前提始有實現之可能，然保險單貼現交易中既存在締約實力 不平等與保險人與被保險人間、被保險人與保單貼現提供者、保單貼現提供者與 保險人間及保單貼現提供者與投資人間種種資訊不對稱，時不宜貿然去管制化 (Deregulation)，反而需採有效監理措施。實則，美國保險監理官協會(National Association of Insurance Commissioners, NAIC)發佈之「保單貼現模範法」 (Viatical Settlements Model Act)及各州監理法規關於保單貼現部分之規定， 加以美國證券交易委員會(Securities and Exchange Commission, SEC)試圖將 保險單貼現商品納入證券交易法(Securities and Exchange Act 0f 1934)之監 理作為，在在顯示對保險單貼現商品以法規範加以規制即由保險或證券監理機關 監理仍屬趨勢。 準此，本研究首擬就保險單貼現商品性質為確定，蓋唯就該商品為定性， 始得判斷何為最適化之監理架構即應適用之監理法規，關於此部分，保險單貼現 商品發源地之美國及歐洲保險中心之英國法規制度將為本研究考察與比較參採 之對象。進而再就可用作規範與監理工具法規是否得於保險單貼現商品之規範與 監管適用無礙，亦或有應增應修處為探討。本研究終局目的，乃針對我國關於保 險單貼現商品監理法規提出具體修訂建議。
二、研究目的
本計畫之終局目的乃為我國保險單貼現監理法制及相關制度之改革與建構， 擘畫一完整且合於保險基礎原則與保險單貼現商品本質之藍圖。而此一目的，需 奠基於下列四大子目的之達成： (一) 探究保險單貼現商品之內涵、特性、型態與交易結構，並試就保險理論 及證券商品之性質，分析其性商品性質上，究應屬保險商品或證券商品亦或監具 二者之特殊型金融商品。 (二) 比較分析美國與英國關於保險單貼現商品之立法與實況。 (三) 探討我國目前保險貼現商品相關法制及實務之弱化處及所面臨之問題 與挑戰。 11National Association of Insurance Commissioners, 1992 Winter National Meeting, 1993-1 NAIC Proc. 779, 786-87.
7 (四) 採問題解決導向模式，為我國就保險單貼現商品法規與制度之建構所面 臨之問題含保險契約法、保險監理法、證券法規上之問題，尤其關於被保險人、 受益人與投資人權利保障及商品應否合法化及監理密度等事項，提供可行方案與 選擇。
三、 文獻探討
(一) 國內文獻 國內關於保險單貼現之法制與監理之研究極其缺乏。於期刊論文方面，較 具代表性者僅王超馨氏於 2003 年發表之「貼現保單市場實務與法律問題之研究」 一文12 ，及卓俊雄氏於 2005 年撰著之「保單貼現法制之探討─以美國經驗為論述 中心」一文13 。 學位論文方面，亦僅兩篇。分別為：(1)杜冠民，人壽保險單貼現之法制化 研究─以美國法為中心，2005 年，政治大學風險管理與保險學系碩士論文；及 (2)張君帆，論保單貼現商品之法規範─證券交易法或保險法？，2009 年，世新 大學法研所碩士論文。 (二) 國外文獻 美國屬保險單貼現商品之發源國，關於保險單貼現相關法規與監理之論著 亦最豐。屬於「法源」類之文獻，除有 SEC v. Life Partners、State v. Viatical Services, Inc.及 Amex Life Assurance Co. v. The Superior Court of L.A. County 等指標性判決，對保險險單貼現商品之定性與保險單貼現之招攬詐欺等 事項陳述法律意見。NAIC 之 Viatical Settlements Model Act 及 Viatical Settlements Model Regulation 等二模範法，為各州提供保險單貼現商品之監 理法規之立法原則及指引，均具參酌價值。於期刊論文方面，於 WestLaw 之”Journals & Law Reviews”資料庫以標 題 (Title) 搜 尋 ， 以 ”viatical settlements” 為 標 題 者 共 計 七 十 五 篇 ， 而 以”Life Settlements”為標題進行搜尋，則得三十三篇。
英國方面，對保險貼現商品則稱為” Traded Life Policy Investments (TLPIs)”。英國金融監理官FSA本身即發佈有”Guidelines on Traded Life
12王超馨著，貼現保單市場實務與法律問題之研究，民國 92 年，壽險季刊第 129 期。
13卓俊雄，保單貼現法制之探討─以美國經驗為論述中心，2005 年，東海大學法學研究，頁
8
Policy Investments”報告。另FSA於2012年8月亦發佈92頁之” Restrictions on the retail distribution of unregulated collective investment schemes and close substitutes”官方研究報告，對TLPIs之監理法規之嚴格化，提出建 議，並對該商品之潛在風險為警告，為主張嚴格監理者之主要參考素材。 (三) 國內外重要文獻評述 1. 國內部分 國內研究保險單貼現之文獻有限已如前述。於前述之兩篇期刊論文及兩份 碩士論文中，三篇為 2005 年或以前撰著，距今已達八年。此八年間，弗論保單 貼現市場之發展、商品之樣態、美國 NAIC 之模範法、英國 FSA 之監理指引及國 內判決與監理機關之政策上之發展均有不少之轉變，故 2005 年以前之文獻於研 究之時宜性上，已顯不足。較晚近者，僅張君帆氏於 2009 年所撰之「論保單貼 現商品之法規範─證券交易法或保險法？」碩士論文而已。 王超馨氏於 2003 年所撰之「貼現保單市場實務與法律問題之研究」一文， 側重市場實務之研究，然該文發表於十年前，如前述，十年間因保險單貼現商品 之變形、出售之保單種類、商品設計及監理法規更迭等因素，使該文已不具時效 性而使其參酌價值有限。卓俊雄氏於 2005 年撰著之「保單貼現法制之探討─以 美國經驗為論述中心」一文，乃國內第一篇，亦恐係目前唯一一篇 TSSCI 等級法 學期刊論及保險單貼現商品者，其自美國之學說、市場概況與法理角度探討適切 之保險單貼現商品監理法規，並對我國法規提出檢討，為早期研究架構較完整且 採比較法研究之專論，具一定之參採價值。然如前述，該文成文於八年前，當其 時，我國法院尚未對保單貼現商品有任何具體判決，金融監理機關亦未對保險單 貼現商品之監理政策以任何函令為表示，加以現今之保險單貼現商品，已非單單 受益權轉讓如此簡單，證券化之保險金受益權證券商品反成主流，其道德性爭議 亦不可同日而語，加以關美國 NAIC 關於保險單貼現之模範法履有修訂，該文撰 著之時空背景，與現況已生一定程度之落差。本研究之目的，則係以最新之保險 單貼現之市場現況與 NAIC 與美國各州法規及英國 FSA 之相關監理指引，輔以我 國法院近數年關於保險單貼現商品之判決與金融監督官理委員會之政策指引為 藍本。 杜冠民氏於 2005 年之「人壽保險單貼現之法制化研究─以美國法為中心」 碩士論文，與前開期刊論文存在相同之時效性問題。另該文聚焦於證券法規之研 究，似已定論保險貼現商品應由證券法規規制，並將之定性為證券商品。本研究 不否認其具證券商品之性質，然其畢竟由人壽保險單之保險金受取權衍生，其於 保險法契約法及監理上之問題，均不宜被忽略，此本文所較未著重者。至於張君
9 帆氏於 2009 年碩士論文，則側重美國之案例法研究，對美國之著名案例如 SEC v. Life Partners 等案之內容有詳細介紹，加以其較具時效性，為研究美國判例法 關於保險單貼現商品立場具參酌價值之文獻。較可惜者，該文側重判例法，而忽 卻主要發揮監理功能之成文法，即 NAIC 之模範法與各州州法，是其稍嫌不完足 處，本研究則二者兼備，並不偏廢，並研究英國制度，研究完成度，應高於國內 現有文獻。 2. 國外部分 本研究主題之外為參考文獻豐富，茲舉數具代表性者以對： 因美國保險單貼現商品早自 1996 年即已出現，故早期文獻，即已論及保險 單貼現商品相關問題。如 Joy D. Kosiewicz 於 1998 年之 “Death For Sale: A Call to Regulate the Viatical Settlement Industry”一文，即已辯論對保 單貼現商品是否需高度監理即應適用之監理架構與法規問題，其自保險單貼現商 品交易結構入手，決定最適化監理架構與法規之論證方法，頗具參考價值。Fiona Jones 於 2000 年發表之“The Viatical Settlement Industry: The Regulatory Scheme and its Implications for the Future of the Industry”一文，則專 門針對成文法尤其係 NAIC 模範法為剖析及 1934 年美國聯邦證券交易法 (Securities & Exchange Act of 1934)之適用可能為論述，乃研究美國監理法 規 之 重 要 參 考 文 獻 。 Anna D. Halechko 於 2004 年 發 表 之 “Viatical Settlements: The Need For Regulation to Preserve the Benefits While Protecting the Ill and the Elderly From Fraud”一文，則聚焦於保單貼現 商品中各類詐欺之問題，含被保險人對保單貼現提供者及保險人之詐欺、保單貼 現提供者對被保險人之詐欺及保單貼現提供者對投資人之詐欺等樣態，並對各樣 態之詐欺提出監理對策，為保單貼現中詐欺問題研究卓具深度之文獻。Sachin Kohli 於 2006 年所撰之 “Pricing Death: Analyzing the Secondary Market for Life Insurance Policies and its Regulatory Environment” 則比較 NAIC 模範法與 National Conference of Insurance Legislators(NCOIL)針對保險單 貼現商品公佈之模範法之不同，尤其於商品定價及利益衝突監理上之差異，乃少 數文獻論及 NOCIL 模範法者，因其模範法亦為部分州法所採為立法藍本，該文對 個州州法之研析上，亦有助益。最晚近者，則為 Eli Martin Lazarus 於 2010 年 在 《 耶 魯 大 法 法 律 與 政 策 評 論 》 (Yale Law and Policy Review) 發 表 之 “Viatical and Life Settlement Securitization: Risks and Proposed Regulation”一文，其著重者為保險單貼現商品近期發展之考察，尤其係證券化 商品之出現。其並建議自保護消費者之觀點針對保險單貼現商品證券化之監理予 以改革，見解獨到，為研究保險單貼現商品之衍生性商品之重要文獻。
10
四、 研究方法
本研究兼採「比較法研究」及「問題解決導向」二主要研究方法。並兼用 其他法學方法如法律解釋方法及少量之對「政府法規範」(Regulation)之經濟分 析。 就比較法研究以言，本文擬考察保險單貼現商品發源及蓬勃之美國及英國 對投資型保險規範之相關法律。除依國別為個別研究外，並比較各國制度之差異 與優劣，尤其各國對保險單貼現商品之法律規範架構與規範內容，尤係研究與比 較之重點。 至於問題解決導向之方法，則於本研究之後段使用。如前述，我國現行保 險單貼現商品管理之法規，付之闕如，監理法規無論係保險法規或證卷法規均有 不足。本研究首就我國現行法規存在之問題為詳察；次就各該問題於所研究之他 國制度中，找尋一至數個可行之解決之道；最末，配合我國現行保險單貼現商品 內容與市場實況，於數可選擇之方案中，擇於吾國最適採取者，提出立法建言。 於方案選擇過程中，少量之成本效益分析方法，亦將使用。五、 結果與討論
Regulating Viatical Settlement Contracts in Taiwan
-- Traditional Way or Modern Way?
Kuan-Chun Johnny Chang I. Introduction
The viatical settlement is an investment contract pursuant to which an investor acquires an interest in the life insurance policy of a terminally ill person, originally an AIDS victim, at a discounted face value, depending upon the insured's life expectancy.14 When the insured dies, the investor receives the benefit of the insurance.15 The investor's profit is the difference between the discounted purchase price paid to the insured and the death benefit collected from the insurer, less
Associate Professor, National Chengchi University College of Law; S.J.D. Georgetown University
Law Center.
14
Liza M. Ray, The Viatical Settlement Industry: Betting on People's Lives Is Certainly No “Exacta,” 17 J. Contemp. Health L. & Pol'y 321, 322 (2000).
11
transaction costs, premiums paid, and other administrative expenses.16 On the other hand, it helps the terminally or chronically illed person by providing him/her immediate lump-sum cash payment of a fraction of policy’s face value with no restriction on how the money can be spent.17
The viatical industry was born in the 1980s in response to the Acquired Immune Deficiency Syndrome (AIDS) crisis.18 In that era, AIDS was a rapidly fatal disease whose victims usually died within a few months of their diagnosis so that patients’ life expectancies were short and relatively predictable. Since numbers of AIDS sufferers were single gay men who had little need to leave their insurance proceeds to beneficiaries, but were in great need of an infusion of income to pay for their care, they were attractive subjects for viatication.19 Although the industry enjoyed dramatically growth, the essential characteristics of the viator population changed. The development in medicine made AIDS a treatable, if not curable, disease and AIDS patients' lives could be continued for years on a regimen of antiviral “cocktails.”20
“They no longer were the sure bet for rapid demise that had been so attractive to the early viatical settlement companies”.21 Meanwhile, the viatical settlement providers found new markets for their product in growing chronically-illed and elderly persons, for instance, people suffering from cancer, Alzheimer's disease, and other progressive illnesses, and weak elderly men and women in need of funds for assisted living, who consider viatical settlements a new source of income.22 Morover, affluent older people having purchased life insurance when their children were young but no longer felt the need to provide for them might sell their policies in exchange for at least a partial return from their policies.23 By the late 1990s, viatical marketers focused heavily on these new target populations of terminally and chronically ill elderly, and AIDS sufferers comprised only a small percentage of viators.24
Although the original purpose of the viatical settlements is undoubtedly positive, several issues associated with such product need to be addressed. These issues
16
Alexander D. Eremia, Viatical Settlement and Accelerated Death Benefit Law: Helping Terminal, But Not Chronically Ill Patients, 1 DePaul J. Health Care L. 773, 777 (1997).
17 Ffiona M. Jones, The Viatical Settlement Industry: The Regulatory Scheme and its Implications for
the Future of the Industry, 6 Conn. Ins. L.J. 477, 479 (2000).
18 Joy D. Kosiewicz, Death for Sale: A Call to Regulate the Viatical Settlement Industry, 48 Case W.
Res. L. Rev. 701, 703 (1998).
19 Anna D. Halechko, Viatical Settlements And The Elderly: Potential Advantages And Hidden
Dangers, 6 N.Y. City L. Rev. 135, 138 (2003).
20
Id.
21 Id.
22 Miriam R. Albert, The Future of Death Futures: Why Viatical Settlements Must be Classified as
Securities, 19 Pace L. Rev. 345, 357 (1999)
23
Joseph B. Treaster, Death Benefits, Now for the Living, N.Y. Times, Sept. 27, 1998, § 3, at 1.
12
include the ethical issue (i.e. lack of insurable interest and privacy), the conflict of interest incurred by the imbalance of bargaining power between the viator and viatical settlement providers, the fraud on the investors. Nevertheless, the preliminary yet more fundamental issue that should be tackled before addressing those issues is whether the viatical settlement should be categorized as “insurance” so as to subject to the insurance regulation or as the “securities” pursuant to the securities regulation. In the U.S., while Securities and Exchange Commission (SEC) has expressed concern over adequate regulation on viatical settlements, courts have never reached consensus on the question of whether viatical arrangements should be considered “securities” and thus subject to the control of the.25
If they are deemed to be securities, the vitical provider would be required to make disclosure of certain information regarding risks and performance of the investments, so that potential buyers would have the capability of making informed decisions.26 On the other hand, the National Association of Insurance Commissioners (NAIC) has developed the Viatical Settlements Model Act (hereinafter Model Act) 27 and Viatical Settlements Model Regulation (hereinafter Model Regulation)28 to guide states in their supervision of the viatical industry.
Nevertheless, the viatical settlement are virtually unregulated under Taiwanese law due to the same difficulty in either categorizing it as insurance subject to the regulation of Insurance Act or as the “securities” to be supervised under Securities and Exchange Act. Such dilemma cause the Financial Service Commission (FSC) has neither the authority to either supervise firms selling the viatical settlement, nor does it capable of assisting investors to file claims against viatical settlement providers. This awkward situation reflects unsettled issues regarding the regulation of viatical settlements including the nature of viatical settlements and the appropriate regulatory scheme.
Hence, this note begins with the attempt to identify the nature of the viatical settlements. It is the notion of this research that only after the nature of such product is ascertained can applicable laws and regulations be determined. Laws and regulations of the U.S. will be introduced and discussed. After the nature of the viatical settlement and proper regulation to be utilized has been clarified, various regulatory issues would be addressed. The ultimate goal of this research is to,
25
Elizabeth L. Deeley, Viatical Settlements are not Securities: Is it Law or Sympathy? 66 Geo. Wash. L. Rev. 382, 383 (1998).
26 Anna D. Halechko, Viatical Settlements: The Need For Regulation to Preserve the Benefits While
Protecting the Ill and the Elderly from Fraud, 42 Duq. L. Rev. 803, 813(2004).
27
Viatical Settlements Model Act (Nat'l Ass'n Ins. Comm'rs 1993) (amended 2009).
13
through comparing the system of various countries, propose an optimal regulatory system for viatical settlements in Taiwan.
II. Viatical Settlement – How Does it Work? (I) Meaning of the Viatical Settlement
A viatical settlement is a contractual agreement by which a terminally-ill individual can sell his life insurance policy to an investor who pays the insured a discounted face value and then collects the policy benefit upon the insured's death.29 The investor's return comes from the difference between the death benefits ultimately paid, ordinarily the policy's face value, and the discounted amount paid to the policyholder.30 Originally, a viatical settlement is a way in which a dying person can acquire access to resources to pay for living and medical expenses in his last days of life.31 “This noble-sounding purpose, however, has been complicated and often corrupted by the actions of over-zealous entrepreneurs who are willing to take advantage of the most vulnerable in society in order to increase profit”.32 In recent years, viatical settlements have been marketed to the chronically and terminally ill, and the elderly also have become targeted as a major market for this financial vehicle.33
(II) Parties Involved
The key parties in a viatical settlement are the insured, known as the viator, the insurance company who issued the policy, and the viatical settlement provider (hereinafter the VSP) who purchases the policy from the insured.34 However, in some cases, the VSP is actually a broker who merely matches the viator with an investor who will actually purchase the policy.35 As the investment market in viaticals has grown, the roles of provider and broker have become blurred.36 The viatical provider may also sell beneficiary and ownership rights to investors.37 Many providers purchase policies in order to resell them to investors or merge them into
29 North Carolina Dept. of Ins., A Consumer’s Guide to Viatical Settlements 1 (2002) available at
http://www.ncdoi.com/_Publications/Consumer%20Guide%20to%20Viatical%20Settlements_CLI1.pd f.
30 Albert, supra note9, at 348. 31 Id.
32 Anna D. Halechko, Viatical Settlements: The Need for Regulation to Preserve the Benefits While
Protecting the Ill and the Elderly from Fraud, 42 Duq. L. Rev. 803, 804 (2004).
33 Lawrence A. Frolik, Insurance Fraud on the Elderly, Trial, Jun. 2001, at 48. 34 Consumer’s Guide, supra note 16, at 2.
35
Albert, supra note 9, at 349.
36
Halechko, supra note 19, at 804.
14
large investment pools, which are then sold in fractionized interests or shares.38 These mutual funds of viaticated policies or “death futures” have become popular investment vehicles.39
(III) Framework of the Viatical Settlement A. Types of Viatical Settlement Providers
As briefly mentioned earlier, there are three types of VSP: funding, brokerage and syndicate companies. The first type of VSP which buys life insurance policies directly from terminally ill people, using either private funds or money received through the sale of company stock, holds all the rights to the insurance policy and act as the designated beneficiary of the policy and assume the attendant portfolio risk.40 The viatical settlement industry deems these transactions “nonbrokered” because the VSP purchases the policies directly.41 Such type of VSP is also known as funding companies.42
The second type of viatical settlement company acts as a middle person or broker who matches a group of potential buyers with the viators who have a life insurance policy available for sale, rather than directly purchasing the policy itself.43 A broker often makes the initial contact with the viator, who may not even be aware of the true purchaser of his policy.44 The majority of VSP in the viatical settlement industry fall into this category.45 The broker does not own the insurance policy; instead, the settlement contract typically entitles the broker to a commission usually 4 to 6 percent of the death benefit.46
The third type of VSP, a syndicate company, is “a species of a funding company that ‘syndicates’ the sale of policies to pools of individual investors who then acquire fractionalized interests in a policy or a group of policies”.47 These companies place their emphases on creating the secondary markets so as to hedge the risks inherent in a viatical settlement transaction.48 The syndicators receive a fee for setting up the
38 Kosiewicz, supra note 5, at 712. 39 Albert, supra note 9, at 350-51. 40
Shanah D. Glick, Comment, Are Viatical Settlements Within the Regulatory Control of the Securities Act of 1933?, 60 U. Chi. L. Rev. 957, 957 (1993).
41 Dave Luxenberg, Why Viatical Settlements Constitute Investment Contracts Within the Meaning of
the 1933 & 1934 Securities Acts, 34 Willamette L. Rev. 357, 360 (1998).
42 Jones, supra note 4, at 481. 43
Id.
44 Halechko, supra note 19, at 805.
45 Pamela Sherrid, Enriching the Final Days, U.S. News & World Rep., Aug. 21, 1995, at 59. 46
Luxenberg, supra note 28, at 361.
47
Jones, supra note 4, at 481.
15
sale and assume no portfolio risk.49
One such market involves ‘fractionalizing’, in which a company facilitates ‘the sale of life insurance policies from (the patient) to investors at a discount’. These companies sell fractional interests in the patient's insurance policy to retail investors…Fractionalizing spreads the risk among investors and allows each investor to have an interest in more than one life insurance policy.50
B. Factors Determining How Much the Viator Receives
Several factors determine the amount a purchaser will pay a viator for his policy. The most important factor, of course, is the projected life expectancy of the viator as determined by a physician as investors’ risk and return depends primarily on the date of the viator's death, and, to a lesser extent, on the speed with which the insurance company is notified and ultimately pays out on the policy.51 Usually, life insurance policies covering individuals with grave illnesses and shorter life expectancies can be expected to produce much larger viatical settlement offers than similar policies covering healthy individuals.52 Other factors include “prevailing interest rates, premium obligations, credit-worthiness of the insurance carrier, and any outstanding loans against the policy”.53 In ordinary case, the amount the viator expect to receive in the secondary market depends on a range of factors is generally more than the policy’s cash surrender value and less than the net death benefit.54
III. Regulatory Issues of A Viatical Settlement
There are several regulatory issues imbedded in viatical settlement transactions, including ethical issues, conflicts of interest, confidentiality concerns, and fraud, all of which should be disclosed as risk factors to investors in viatical settlements.
(I) Ethical Issues
Owing to the complexity of the viatical settlement transaction, it poses some dangers for the viator, who may not be aware initially that he is dealing with a conglomerate of businesses rather than with an individual.55 The major imbalance of
49
Id.
50 Id.
51 Jones, supra note 4, at 481; Albert, supra note 9, at 348. 52
Consumer’s Guide, supra note 16, at 2.
53
Jones, supra note 4, at 482.
54 Financial Industry Regulatory Authority, Seniors Beware: What You Should Know About Life
Settlements 2 (2011) available at
http://www.finra.org/web/groups/investors/@inv/@protect/@ia/documents/investors/p125848.pdf.
16
the bargaining between the viator and the VSP and his associates creates the likelihood for abuse.56 Because of his/her illness, the viator may not have the time, energy or motivation to shop around for the best payment.57 Nor may the viator be informed that he/she is forfeiting all rights to the policy for himself and his former beneficiaries.58 Time is precious to the viator, so issues may arise if the payment is delayed or some other problem occurs, and he is unable to contact the VSP.59 In the case where VSPs serves as a broker, by misinforming a viator, VSPs may induce a viator to settle with a purchaser that, in the end, will not be able to perform as promised.60 Marginally solvent or insolvent VSPs may also compound the harmful effect of this misinformation by luring viators away from opportunities to settle with solvent VSPs.61 Even for a healthy person, the litigation arising from such misrepresentation would be both annoying and time-consuming.62 For a terminally ill person, it would not only underscore an immeasurable personal tragedy, but would also probably not be financially or practically feasible.63
(II) Conflicts of Interests
The viatical settlement industry is subject to conflict of interest problems that pit the agendas of others against what may truly be in a viator's best interest. Given that VSP is financially justified to find viators who will predecease their life expectancy, the evaluation of a viatical application includes an examination of the quality of the viator's medical care; the lower the quality of care, the more quickly the viator is likely to die.64 That is to say, viatical firms have strong financial incentives to discourage or prevent viators from participating in experimental or life-prolonging therapies.65 Thus, the clearest potential conflict of interest in the viatical settlement industry arises when health professionals and care providers ally themselves with viatical settlement firms.66 “The concern stems from a caregiver who becomes financially linked to a venture that ultimately benefits from the viator's death, with the
56
Andrew B. Wright, Idaho at A Crossroads: Choices for Regulating Viatical Settlement, 39 Idaho L. Rev. 179, 197 (2002).
57 Miriam R. Albert, Selling Death Short: The Regulatory and Policy Implications of Viatical
Settlements, 61 Alb. L. Rev. 1013 (1998).
58 Kosiewicz, supra note 5, at 705. 59 Halechko, supra note 19, at 806.
60 Bernard A. Jacobs, Viatical Settlements in Montana: New Legislation Serves the Terminally Ill, 59
Mont. L. Rev. 81, 83 (1998). 61 Id. 62 Id, at 84. 63 Id. 64
Albert, supra note 9, at 364.
65
Id.
17
size of such benefit inversely related to the length of the viator's life”.67 The issue aroused is whether it is morally appropriate, for a facility providing services to terminally-illed patients to ally itself with a venture profiting from the death of its patients. The conflict takes place on an enterprise-wide level, in relationships between health care providers and VSPs, and on an individual level, between one health care staff and one VSP.68 If VSPs offer their services directly to hospitals, and some physicians request direct commissions for referring viators to viatical settlement firms, the potentiality for these conflicts of interest must at least be disclosed to viatical settlement investors in order for them to make informed investment decisions.69
(III) Privacy
Issues of confidentiality and privacy are also associated with the viatical settlement, since each additional party to the viatical transaction may gain access to the viator's medical records and may even intrude upon the viator's privacy directly by phoning or visiting him at home, ostensibly to see how he is doing but actually to determine that he is still alive.70 Even though in most viatical settlements, the viator releases his or her medical records to the VSP under the condition that a confidentiality provision is added to the agreement, at least some of the viator's specific medical history will need to be disseminated to potential investors as part of the necessary, albeit, macabre, marketing of the policy.71
(IV) Fraud
The most common type of fraud lies in that disingenuous providers and brokers deceive good-faith viators and investors. The primary occasion where a viator is defrauded is by receiving payment that is far below the present value of his policy.72 This is because VSPs deal with thousands of proposed viatical settlements and have the experience in pricing these settlements, but the terminally ill are likely to have never sold a life insurance policy before and are, therefore, completely inexperienced and ignorant in evaluating its true worth.73
There are various schemes have been perpetrated by VSPs to solicit investors in a fraudulent manner, often from the vulnerable elderly population. For example, in
67 Id. 68
Pamela Sherrid, Enriching the Final Days, U.S. News & World Rep., Aug. 21, 1995, at 56.
69 Albert, supra note 9, at 365-66. 70 Halechko, supra note 6, at 137. 71
Albert, supra note 9, at 366.
72
Halechko, supra note 19, at 812.
18
Securites and Exchange Commission v. Tyler,74 the defendant was accused of enticing more than 480 elderly investors into purchasing viatical shares with false guarantees of liquidity, high interest rates, and fixed maturity dates. In reality, viaticals are generally not liquid, do not have fixed maturity dates (since the date of the insured's death is uncertain), and their rate of return is a variable dependent upon how long the insured survives after his policy is sold.75 Tyler solicited investors through an elaborate campaign of newspaper ads, investment seminars, telemarketing calls, and mass mailings.76 Problems arose when the investments reached their promised maturity dates, and the viators were still alive.77 Tyler hence intended to create a liquid market by purchasing large numbers of viatical contracts in his own name and then selling shares to investors.78 If an investor wanted to sell his share, Tyler would buy it back or transfer it to another investor.79 This artificial liquidity failed to hold up when Tyler did not have sufficient resources to meet the demands of the investors, and eventually he had to file for bankruptcy.80
IV. Regulations in the U.S.
A common issue that has arisen in litigation involving viatical settlements is whether a viatical settlement is subject to the provisions of federal securities law.81 While the Securities and Exchange Commission (SEC) of the U.S. has long insisted that vitical settlements constitute a security under the federal securities laws and brought a number of enforcement actions alleging fraud in connection with life settlement investments,82 viatical settlements have been judicially determined to fall outside the protections of the Securities Laws.83 On the other side, with respect to the issue whether a viatical settlement contract remains the status of insurance contract, at least one federal court determined that viatical settlement contracts do not constitute insurance contracts, and sale of viatical settlement contracts does not constitute the "business of insurance" for the purpose of federal law unless any state legislator attempt to regulate it as the business of insurance.84 However, in 1990, California became the first state to determine that state insurance law should govern
74 2002 U.S. Dist. LEXIS 2952, at 2 (N.D. Tex. Feb. 21, 2002). 75 Id, at 3. 76 Id. 77 Id, at 4. 78 Id, at 6. 79 Id. 80 Id, at 7. 81
Michele Meyer McCarthy, Federal Regulation of Viatical Life Insurance Programs, Viatical Settlements, and Viatical Investments, 1 A.L.R. Fed. 2d 269 (2005).
82 SEC, Life Settlement Taskforce Staff Report to U.S. Securities and Exchange Commission vi (2010)
available at http://www.sec.gov/news/studies/2010/lifesettlements-report.pdf.
83
Albert, supra note 9, at 379.
19
the viatical settlement process.85 Soon after, the National Association of Insurance Commissioners (“NAIC”) agreed and adopted the Viatical Settlements Model Act (“the Model Act”) in 1993 and the Viatical Settlements Model Regulation (“the Model Regulation”) in 199486
. The Model Act and Model Regulation contain various provisions regulating the process of viatical settlement which have been introduced into 43 states’ insurance legislations.87
(I) Securities Regulation A. Standpoints of the SEC
According to SEC’s Life Settlement Taskforce Staff Report, the SEC recommended the Congress to amend the definition of “security” under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940 to include life settlements.88 Such amendment should clarify the status of life settlements under the federal securities laws and provide for a more consistent treatment of life settlements under both federal and state securities laws.89
First, the SEC proposed that the amendment of the definition of “security” under the Securities Act of 1933 should include that all offers and sales of life settlements, whether single life settlements or fractional interests in life settlements, would need to be registered with the SEC, unless an exemption from such registration requirement is available.90
Second, with respect to the Securities Exchange Act of 1934, the amendment of the definition of “security” should subject market intermediaries in the life settlements market to the regulatory framework of the SEC and FINRA.91 In that case, the market intermediaries would be required to register with the SEC and a self-regulatory organization (“SRO”), such as FINRA, and would become subject to a comprehensive set of SEC and SRO requirements that are designed to protect
85
Cal. Ins. Code §§ 101191.1-2 (1995).
86 Model Act, supra note 14 and Model Regulation, supra note 15.
87 States that have enacted regulation on viatical settlements include Alabama, Alaska, Arizona,
Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin. For details, see Life Insurance Settlement Association, State Document Report,
http://www.lisa.org/state-document-report.aspx (last visited Mar. 29th 2014).
88 SEC Report, supra note 69, at viii. 89
Id.
90
Id, at 21-22.
20
investors from abusive practices and to conduct business in the manner facilitating fair, orderly and efficient markets.92 Intermediaries’ should be imposed upon a duty to deal fairly with customers, a duty to seek to obtain best execution of customer orders, suitability requirements, and a requirement that compensation for services be fair and reasonable.93 In addition, the amendment should endow the SEC and FINRA clear authority to police the life settlements market for compliance with the federal securities laws and SRO requirements, which could “lead to early detection of abuses and help deter fraud”.94
Third, definition of “security” under the Investment Company Act of 1940 should be amended to mean that a pool of life settlements issuing interests in the pool would be an investment company under the Investment Company Act, unless it falls within an exemption.95 “Investors in the pool would benefit from the comprehensive federal regulatory framework the Investment Company Act establishes for investment companies”.96
B. Case Law
SEC v. Life Partners Inc. 97 is the most representative Federal case that SEC failed in challenging a VSP's practice of selling fractional interests in viatical settlements without filing registration statements and otherwise complying with the requirements of the Securities Act and the Exchange Act.98 SEC v. Life Partners Inc were rejected by several Federal and State courts respectively.
a. Case Holding that Viatical Settlements are not Securities -- SEC v. Life Partners Inc.
(a) Factual Background
LPI bought life insurance policies from terminally ill persons and resold fractional interests in viatical settlements to investors who paid as little as $650 and purchased as little as three percent of the benefits of a policy.99 If LPI was unable to attract enough investors to sell one hundred percent of the interest in the viatical 92 Id, at 25. 93 Id, at 26-27. 94 Id, at 30. 95 Id, at 41. 96 Id. 97 87 F.3d 536, 538 (D.C. Cir. 1996). 98
Michael R. Davis, Unregulated Investment in Certain Death: Sec v. Life Partners, Inc., 42 Vill. L. Rev. 925, 928 (1997).
21
settlement, it allowed the viator to withdraw from the transaction.100 SEC contended that such investment were securities. In 1995, the SEC filed an action against Life Partners alleging that by selling fractional interests in viatical settlements to individual investors, Life Partners was selling unregistered securities in violation of sections 5(a) and (c) of the Act, and section 15(a) of the Securities Exchange Act of 1934 (collectively, “the Acts”).101
In August 1995, the district court denied the SEC's request that it enjoin Life Partners from conducting further sales. Nonetheless, the court ordered Life Partners to bring its operations into compliance with the Acts expediently.102 Life Partners failed to comply with the court's prior orders.103 As a result, in January 1996, the district court issued a preliminary injunction enjoining Life Partners from offering or selling “unregistered fractional interests in viatical settlements.”104
In March 1996, after Life Partners filed an affidavit, sworn by its president, asserting that it had complied with the court's prior orders and planned to resume the sale of fractional interests in viatical settlements.105 In fact, LPI alternated its viatical settlement packages in an attempt to comply with the District Court's order. First, in LPI's revised viatical settlement investment program in which LPI was no longer listed itself as the owner of the insurance policies.106 LPI instead listed the investors as the owners upon purchasing their interests in the policies.107 This shifted the contractual obligations of the insurance companies directly to the investors instead of to LPI.108 The court granted an emergency motion for supplemental provisional relief filed by the SEC.109 Granting this motion, the court enjoined Life Partners from selling fractional interests in viatical settlements pending the decision of the District of Columbia Circuit.110
(b) The D.C. Circuit's Ruling
The court of appeals for the District of Columbia applying the Act and the Howey test, 111 held that the fractional interests in viatical settlements, offered and
100 Id, at 544.
101 Life Partners, 898 F. Supp. at 17. 102 Id, at 19. 103 87 F.3d at 538. 104 Id. 105 Id. 106 Id, at 540 107 Id. 108 Id. 109 Id, at 536. 110 Id. 111
The Howey test is the three-pronged test used by the U.S. Supreme Court in SEC v. W.J. Howey Co. Under this test, an investment contract is deemed to be a security if the investors (1) expect profits from
22
sold to individual investors by Life Partners, did not constitute securities.112 This decision placed these investment contracts outside the regulatory authority of the SEC.
The DC Circuit Court opined that the first and second prong of the Howey test were met since the investors in the Life Partners viaticals expected profits, and clearly, theirs was a common enterprise in that their funds were pooled to buy the policies and they shared any profits or losses after the policy benefits were paid out.113 Nevertheless, the court ruled that the third prong of the test was not met, because Life Partners performed no essential entrepreneurial services after the purchase of the contracts.114 It is the court’s reason that the profitability of the investment was directly determined by how long a viator lived, not by any actions of Life Partners itself.115 The court manifestly precluded the pre-purchase activities performed by Life Partners, such as identification of potential viators, rating of medical risk, and negotiation of contract price from the “efforts-of-others” requirement of the third prong.116 Clearly, the court established a bright-line test: an investment contract would only be considered a security if, post-purchase, the seller continued to perform some substantial activity that affected the profitability of the arrangement.117
b. Case Holding that Viatical Settlements are Securities
Life Partners has been rejected repeatedly in both Federal and States courts ever
since it was decided. The following section highlights merely two signature cases. (a) SEC v. Tyler118
In SEC v. Tyler, the U.S. District Court for the Northern District of Texas reasoned that the defendant performed a post-purchase service when he bought viaticals in his own name and sold fractions to investors.119 By doing so, Tyler created a form of liquidity that increased the value of the investment.120 Where investors wanted to sell their shares, Tyler would either sell them to others or buy them back himself, thus an artificial secondary market has been established.121 Even
(2) a common enterprise that (3) depends on the efforts of others. See 328 U.S. 293, 298-99 (1946).
112 87 F.3d at 536. 113 Id, at 539. 114 Id, at 546. 115 Id, at 545. 116 Id, at 546. 117 Id, at 548.
118 2002 U.S. Dist. LEXIS 2952 (N.D. Tex. Feb. 21, 2002). 119
Tyler, 2002 U.S. Dist. LEXIS 2970, at *15-16.
120
Id, at 16-17.
23
if the investors may not have been aware of the process created by Tyler, the court opined they relied on his description of the investments as being liquid.122 The court ruled that it was sufficient to pass the third prong of the Howey test and support the court's finding that the viatical investment met the definition of a security.123
(b) Acclerated Benefits Co. v. Peaslee124
Indiana appellate court rejected Life Partners by finding that the
[p]rofits the investors expect[ed] to realize depend[ed almost entirely upon the purchaser's expertise in choosing which life insurance policies to purchase. More specifically, the investors rel[ied] upon the purchaser's ability to estimate the life expectancy of each prospective viator by obtaining expert medical evaluations ... [and] to determine the actual death benefits, ensure the policy [was] not contestable on any grounds, and ensure that the policy [was] assignable.125
(II) NAIC Model Law and Regulation A. Viatical Settlement Model Act
a. Licensing Requirement
Section 3 of the Model Act provides that a person is prohibited from operating as a VSP or viatical settlement broker without first obtaining a license from the commissioner of the state of residence of the viator.126
Any person (applicant) seeking obtain a VSP or viatical settlement broker license shall file the application to the commissioner on a form prescribed by the commissioner, and pay the application fees.127 The Commissioner will issue the license if certain criteria are fulfilled.128 However, the Commissioner is also
122 Id, at 18. 123 Id, at 19.
124 818 N.E.2d. 73 (Ind. Ct. App. 2004). 125
Id, at 77.
126
Model Act §3(A)(1)(2009).
127 Model Act §3(B)(2009).
128 Model Act §3(F)(2009)[These criteria are “(1) If a viatical settlement provider, has provided a
detailed plan of operation; (2) Is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for; (3) Has a good business reputation and has had experience, training or education so as to be qualified in the business for which the license is applied for; (4) (a) If a viatical settlement provider, has demonstrated evidence of financial responsibility in a format
prescribed by the commissioner through either a surety bond executed and issued by an insurer authorized to issue surety bonds in this state or a deposit of cash, certificates of deposit or securities or any combination thereof in the amount of $250,000. (b) If a viatical settlement broker, has
demonstrated evidence of financial responsibility in a format prescribed by the commissioner through either a surety bond executed and issued by an insurer authorized to issue surety bonds in this state or a deposit of cash, certificates of deposit or securities or any combination thereof in the amount of (c) The commissioner may ask for evidence of financial responsibility at any time the commissioner deems
24
endowed the authority to “refuse to issue, suspend, revoke or refuse to renew the license of a viatical settlement provider, viatical settlement broker” under circumstances manifested in the Model Act.129
b. Privacy Protection
Except as otherwise permitted or required by law, a VSP or viatical settlement broker, insurance company, insurance producer, information bureau, rating agency or company, or any other person with actual knowledge of an insured’s identity, shall not disclose that identity as an insured, or the insured’s financial or medical information to any other person unless the disclosure is necessary to effect a viatical settlement between the viator and the VSP or between a viatical settlement purchaser and a VSP, and the viator and insured have provided prior written consent to the disclosure.130
c. Disclosure Requirement
The Model Act requires the VSP or viatical settlement broker to provide the viator, in a separate document, upon his application for vitical settlement contract the following information:
necessary. (d) Any surety bond issued pursuant to Paragraph (4) shall be in the favor of this state and shall specifically authorize recovery by the commissioner on behalf of any person in this state who sustained damages as the result of erroneous acts, failure to act, conviction of fraud or conviction of unfair practices by the viatical settlement provider or viatical settlement broker. (e) Notwithstanding any provision of this section to contrary, the commissioner shall accept, as evidence of financial responsibility, proof that financial instruments in accordance with the requirements in this paragraph have been filed with one state where the applicant is licensed as a viatical settlement provider or viatical settlement broker. (5) If a legal entity, provides a certificate of good standing from the state of its domicile; and (6) If a viatical settlement provider or viatical settlement broker, has provided an anti-fraud plan that meets the requirements of Section 14G of this Act.”].
129 Model Act §4(A)(2009) [Such circumstances include (1)There was any material misrepresentation
in the application for the license; (2) The licensee or any officer, partner, member or key management personnel has been convicted of fraudulent or dishonest practices, is subject to a final administrative action or is otherwise shown to be untrustworthy or incompetent; (3) The viatical settlement provider demonstrates a pattern of unreasonable payments to viators; (4) The licensee or any officer, partner, member or key management personnel has been found guilty of, or has pleaded guilty or nolo contendere to, any felony, or to a misdemeanor involving fraud or moral turpitude, regardless of whether a judgment of conviction has been entered by the court; (5) The viatical settlement provider has entered into any viatical settlement contract that has not been approved pursuant to this Act; The viatical settlement provider has failed to honor contractual obligations set out in a viatical settlement contract [or a viatical settlement purchase agreement]; (7) The licensee no longer meets the
requirements for initial licensure; (8) The viatical settlement provider has assigned, transferred or pledged a viaticated policy to a person other than a viatical settlement provider licensed in this state, viatical settlement purchaser, an accredited investor or qualified institutional buyer as defined respectively in Rule 501(a) or Rule 144A promulgated under the Federal Securities Act of 1933, as amended, financing entity, special purpose entity, or related provider trust; or (9) The licensee or any officer, partner, member or key management personnel has violated any provision of this Act.].
