Investment vehicles for viatical settlement syndication consist of pooling a series of high-premium term and/or ordinary life policies issued on the lives of persons who have been diagnosed with HIV/AIDS or other life threatening illnesses.
Currently, 39 states and Puerto Rico regulate life settlements, and the National Association of Insurance Commissioners (NAIC) recognizes them as a viable solution (NAIC, "NAIC Adopts Viatical Settlements Model Act Revisions," News Release (June 4, 2007), www.
Because of the need to protect insureds and to create a transparent and fair viatical settlements market, the National Association of Insurance Commissioners developed the Viatical Settlements Model Act in 1993 as well as accompanying rules to guide states in their regulation of the viatical settlements industry.
The Internal Revenue Service has taken a more enlightened position in relation to the second possible event where an insured assigns his life insurance contract to the insurance company (as contrasted with the above PLR in which the sale was to a Viatical settlement company) that issued the policy and the accelerated death benefit is paid pursuant to a contract term.
A focal point of the industry's efforts is the National Association of Insurance Commissioners (NAIC), where regulators are considering amendments to the NAIC Viatical Settlement Model Law to close loopholes that allow STOLI transactions.