KOHL RELEASES GAO REPORT ON LIFE SETTLEMENT REGULATION
SEC's Life Settlement Task Force Releases Report in Conjunction
WASHINGTON, D.C. - U.S. Senator Herb Kohl, Chairman of the Senate Special Committee on Aging, today released a
report conducted by the U.S. Government Accountability Office (GAO) on the life settlement industry. A life settlement is a financial arrangement in which a person sells their life insurance policy to investors, who continue to pay the policy premiums and collect the payout upon the seller's death. In the report, GAO warns of the risks posed to consumers who participate in a life settlement transaction due to a lack of clear, consistent state oversight. GAO noted that twelve states and the District of Columbia have no laws or regulations pertaining to life settlements. It is possible, the report states, for insurance policyholders to complete a life settlement without knowing how much they paid in fees or whether they received market value for their policy, because brokers are not required to disclose such information.
"The report shows that regulation desperately needs to catch up to this growing industry. We need to improve oversight not only of individual transactions, but of the bundling and trading of life settlements," said Kohl. "I appreciate that the SEC is making this a priority."
The U.S. Securities and Exchange Commission's (SEC) Life Settlement Task Force
released its own report today, in which it recommends that the full Commission amend the definition of "securities" to include life settlements. Chairman Mary Schapiro announced the creation of an agency-wide taskforce to examine the life settlement industry last September in response to
a letter from Chairman Kohl urging the agency to look into the regulation of life settlement brokers. Chairman Shapiro also clarified the SEC's jurisdiction over most aspects of life settlement transactions at that time.
In April of last year, Chairman Kohl held a hearing-entitled, "Betting on Death in the Life Settlement Market - What's At Stake For Seniors?"-to explore the growing life settlement market, an industry which analysts expect will exceed $160 billion within a few decades. A Committee investigation uncovered unintended consequences for consumers, sales and marketing abuses, and insurance fraud, all of which are exacerbated by the high commissions earned by life settlement brokers. In the midst of a financial crisis that has been blamed on a lack of oversight and regulation, the Committee also examined how life settlements are being bundled and used as potentially risky investments by some of America's largest investment companies.
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For Committee investigation findings and the SEC response, click here:
http://www.aging.senate.gov/letters/lifesettlementfindings.pdf
