Virginia Law

Chapter 71. Rules Governing Viatical Settlement Providers and Viatical Settlement Brokers

14VAC5-71-10. Purpose.

The purpose of this chapter (14VAC5-71) is to implement the Viatical Settlements Act, Chapter 60 (§ 38.2-6000 et seq.) of Title 38.2 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-20. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Chronically ill" means (i) being unable to perform at least two activities of daily living, which shall include eating, toileting, transferring, bathing, dressing or continence, (ii) requiring substantial supervision by another person to protect the individual from threats to health and safety due to severe cognitive impairment, or (iii) having a level of disability similar to that described in clause (i) as determined by the U.S. Secretary of Health and Human Resources as required by § 38.2-6000 of the Code of Virginia.

"Commission" means the Virginia State Corporation Commission.

"Insured" means the person covered under the life insurance policy or certificate being considered for viatication.

"Legal entity" means an entity, other than a natural person, that can function legally, sue or be sued, and make decisions through agents, as in the case of a corporation. Legal entity includes a partnership, limited partnership, limited liability company, corporation, or other legally functioning business entities, other than a sole proprietorship.

"Licensee under this chapter" means a person licensed by the commission as a viatical settlement provider or viatical settlement broker, as may be reasonably construed from the content in which the term appears.

"Life expectancy" means the number of months the individual insured under the life insurance policy or certificate to be viaticated can be expected to live as determined by the viatical settlement provider considering medical records and appropriate experiential data.

"NAIC" means the National Association of Insurance Commissioners.

"Net death benefit" means the amount of the life insurance policy or certificate to be viaticated less any outstanding debts or liens.

"Patient identifying information" means an insured's address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information that is likely to lead to the identification of the insured.

"Policy" means an individual or group policy, group certificate, contract or arrangement of life insurance affecting the rights of a resident of this Commonwealth or bearing a reasonable relation to this Commonwealth, regardless of whether delivered or issued for delivery in this Commonwealth.

"Terminally ill" means having an illness or sickness that can reasonably be expected to result in death in 24 months or less.

"Viatical settlement broker" means a person licensed in Virginia pursuant to § 38.2-1865.1 of the Code of Virginia, that on behalf of another and for a fee, commission or other valuable consideration, introduces viators to viatical settlement providers, or offers or attempts to negotiate viatical settlement contracts between a viator and one or more viatical settlement providers. A viatical settlement broker may act as agent for a viatical settlement provider or on behalf of the viator, provided that a viatical settlement broker shall not be deemed to act exclusively for the viator unless, pursuant to written agreement between the parties, the viatical settlement broker agrees (i) to disclose fully all interests in the viatical settlement contract and relationships with the viatical settlement provider including its affiliates and appointed or contracted agents, and (ii) that compensation for services as a viatical settlement broker shall be paid directly and only by the viator. The term does not include an attorney, certified public accountant, or a financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the viator and whose compensation is not paid directly or indirectly by the viatical settlement provider or viatical settlement purchaser.

"Viatical settlement contract" means a written agreement establishing the terms under which compensation or anything of value will be paid, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the viator's assignment, transfer, sale, devise or bequest of the death benefit or ownership of any portion of the insurance policy or certificate of insurance. A viatical settlement contract also includes a contract for a loan or other financing transaction with a viator secured primarily by an individual or group life insurance policy, other than a loan by a life insurance company pursuant to the terms of the life insurance contract, or a loan secured by the cash value of the policy. A viatical settlement contract includes an agreement with a viator to transfer ownership or change the beneficiary designation at a later date regardless of the date that compensation is paid to the viator. Viatical settlement contracts do not include accelerated death benefit provisions governed by 14VAC5-70, contained in life insurance policies, whether issued with the original policy or as a rider.

"Viatical settlement provider" means a person, other than the viator, that enters into or effectuates a viatical settlement contract. Viatical settlement provider does not include: (i) a bank, savings bank, savings and loan association, credit union or other licensed lending institution that takes an assignment of a life insurance policy as collateral for a loan; (ii) the issuer of a life insurance policy providing accelerated death benefits governed by 14VAC5-70 and pursuant to the contract; (iii) an authorized or eligible insurer that provides stop loss coverage to a viatical settlement provider, viatical settlement purchaser, financing entity, special purpose entity or related provider trust; (iv) a natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit; (v) a financing entity; (vi) a special purpose entity; (vii) a related provider trust; (viii) a viatical settlement purchaser; or (ix) an accredited investor or qualified institutional buyer as described in Securities and Exchange Commission (SEC) Regulation D (17 CFR 230.501 through 17 CFR 230.508) and defined, respectively, in Rule 501 (17 CFR 230.501) and Rule 144A (17 CFR 230.144A) under the Securities Act of 1933, as amended, and who purchases a viaticated policy from a viatical settlement provider and does not communicate with the viator or insured who is a resident of this Commonwealth except through a licensee under this chapter.

"Viatical settlement purchaser" means a person who gives a sum of money as consideration for a life insurance policy or an interest in the death benefits of a life insurance policy, or a person who owns or acquires or is entitled to a beneficial interest in a trust that owns a viatical settlement contract or is the beneficiary of a life insurance policy that has been or will be the subject of a viatical settlement contract, for the purpose of deriving an economic benefit. Viatical settlement purchaser does not include (i) a licensee under this chapter; (ii) an accredited investor or qualified institutional buyer as described in Regulation D (17 CFR 230.501 through 17 CFR 230.508) and defined, respectively, in Rule 501 (17 CFR 230.501) and Rule 144A (17 CFR 230.144A) under the Securities Act of 1933, as amended; (iii) a financing entity; (iv) a special purpose entity; or (v) a related provider trust.

"Viaticated policy" means a life insurance policy, including a certificate of life insurance issued under a group life insurance policy, that has been acquired by a viatical settlement provider pursuant to a viatical settlement contract.

"Viator" means the owner of a life insurance policy or a certificate holder under a group policy who enters or seeks to enter into a viatical settlement contract. For the purposes of this chapter and the application of Article 6.1 (§ 38.2-1865.1 et seq.) of Chapter 18 of Title 38.2 of the Code of Virginia, a viator shall not be limited to an owner of a life insurance policy or a certificate holder under a group policy insuring the life of an individual with a terminal or chronic illness except where specifically addressed. Viator does not include (i) a licensee under this chapter; (ii) an accredited investor or qualified institutional buyer as described in Regulation D (17 CFR 230.501 through 17 CFR 230.508) and defined, respectively, in Rule 501 (17 CFR 230.501) and Rule 144A (17 CFR 230.144A) under the Securities Act of 1933, as amended; (iii) a financing entity; (iv) a special purpose entity; or (v) a related provider trust.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-30. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; repealed, Virginia Register Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-31. License requirements for viatical settlement providers.

A. No person shall act as a viatical settlement provider with a resident of this Commonwealth without first obtaining a license from the commission.

B. The license issued to a viatical settlement provider shall allow the licensee to enter or effectuate a viatical settlement contract only by operating within the scope of its license as a viatical settlement provider.

1. No provision of this chapter shall be deemed to authorize any viatical settlement provider to transact any business other than that of a viatical settlement provider. A viatical settlement provider license shall not authorize the licensee to transact any business in this Commonwealth for which registration, certification or a license is required under any section of the Code of Virginia other than § 38.2-6002.

2. "Viatical settlement provider" does not include, and licensing as a viatical settlement provider shall not be required of, the following persons: (i) a bank, savings bank, savings and loan association, credit union, or other licensed lending institution that takes an assignment of a life insurance policy as collateral for a loan; (ii) the issuer of a life insurance policy providing accelerated death benefits governed by 14VAC5-70 and pursuant to the contract; (iii) an authorized or eligible insurer that provides stop loss coverage to a viatical settlement provider, viatical settlement purchaser, financing entity, special purpose entity or related provider trust; (iv) a financing entity; (v) a natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit; (vi) a special purpose entity; (vii) a related provider trust; (viii) a viatical settlement purchaser; or (ix) the accredited investor, qualified institutional buyer or qualified institutional purchaser under the Securities Act of 1933, as amended, provided the person is acting in the capacity of a person listed above and is neither entering into nor attempting to enter into, nor effectuating nor attempting to effectuate a viatical settlement contract in this Commonwealth or with any resident of this Commonwealth.

3. Except as provided in subdivision 2 (v) of this subsection, no person listed in subdivision 2 of this subsection shall attempt to enter into or effectuate a viatical settlement contract in this Commonwealth or with any resident of this Commonwealth without first becoming licensed as a viatical settlement provider in accordance with the provisions of this chapter. Notwithstanding the foregoing and in accordance with § 38.2-6002 F of the Code of Virginia, no licensed insurer shall be licensed as, or authorized to transact the business of, a viatical settlement provider in this Commonwealth.

C. The licensee shall be a legal entity that enters into or effectuates, or seeks to enter into or effectuate, a viatical settlement contract. The license shall authorize the licensee's partners, officers, members, and designated employees to act on behalf of the viatical settlement provider provided such individual is named in the legal entity's application for license or the application's supplements.

D. A license issued prior to July 1, 2004, shall expire on June 30, 2004, unless the license is renewed in accordance with the provisions of this section or subject to actions of termination, suspension, or revocation prior to expiry.

E. 1. If at the time of renewal, a viatical settlement provider has viatical settlements where an insured, who is a resident of this Commonwealth, has not died, it shall do one of the following:

a. Renew or maintain its license until the earlier of: (i) the date the viatical settlement provider properly assigns, sells or otherwise transfers the viatical settlements; or (ii) the date that the last insured covered by a viatical settlement transaction has died; or

b. Appoint, in writing, a viatical settlement provider or viatical settlement broker that is licensed in this Commonwealth to make all inquiries to the viator, or the viator's designee, regarding health status of the insured or any other matters. A copy of the appointment, acknowledged by the appointed provider or broker should be filed with the commission.

2. No viatical settlement provider shall fail to renew or seek to otherwise terminate its license without certifying to the commission that it has ceased doing business in this Commonwealth and is in compliance with the requirements of subdivision 1 of this subsection. The commission may require documentation supportive of the certification.

F. A license expiring on June 30 may be renewed effective July 1 for a one-year period ending on June 30 of the following year if the required renewal application and nonrefundable renewal fee have been received and the license is not terminated, suspended, or revoked at the time of renewal.

G. Initial and renewal applications shall be submitted to the Bureau of Insurance in a form acceptable to the commission. Forms are available through the website for the Bureau of Insurance, at https://scc.virginia.gov/pages/Company-Licensing-and-Registration-Procedures.

H. Initial applications for licenses that are to be issued on or after July 1, 2003, shall be accompanied by a nonrefundable application fee of $500. A licensee may request renewal by submitting a renewal application and renewal fee of $300 on or before March 1 of the year in which the license shall expire. A viatical settlement provider's failure to submit a renewal application and fee within the prescribed time shall result in the imposition of penalties or other appropriate regulatory action. Notice of the requirements for renewal will be mailed by the Bureau of Insurance to each licensee's mailing address as shown in the records of the Bureau of Insurance. Renewal forms may be posted on the website for the Bureau of Insurance, at https://scc.virginia.gov/pages/Company-Licensing-and-Registration-Procedures.

I. Each application shall fully and clearly disclose the identity of the applicant by complying with the provisions of this subsection.

1. An application for initial licensure shall identify all of the applicant's affiliates, directors, partners, and officers, and also each stockholder, member or employee having, owning or holding a 10% or greater interest in the applicant or an affiliate of the applicant. A renewal application shall update or confirm the accuracy of the information filed with the initial application and any intervening renewal applications or 30-day reports required by 14VAC5-71-70.

2. The commission may require the applicant to disclose the identity of all stockholders, members, and employees.

3. The applicant shall name and fully identify any individual, including any director, partner, officer, member or designated employee, that is to be authorized to act on behalf of the applicant under the license.

4. The commission, in the exercise of its discretion, may refuse to issue a license in the name of a legal entity if not satisfied that all directors, officers, employees, stockholders, partners, members thereof, or other individuals who may materially influence the applicant's conduct meet the standards of this chapter and Chapter 60 (§ 38.2-6000 et seq.) of Title 38.2 of the Code of Virginia.

J. Each application shall include evidence of the viatical settlement provider's financial accountability acceptable to the commission in accordance with the provisions of this subsection.

1. A surety bond in the amount of $100,000, in a form approved by the commission, shall be acceptable evidence of the viatical settlement provider's financial accountability provided (i) the surety bond is for the use and benefit only of the Commonwealth of Virginia and any person having a cause of action against the principal arising out of breaches of laws set forth in this chapter or Chapter 60 (§ 38.2-6000 et seq.) of Title 38.2 of the Code of Virginia; (ii) the surety bond is issued by an insurer licensed in this Commonwealth to transact the business of suretyship or approved by the commission to issue surplus lines coverage; (iii) the surety is neither directly nor indirectly under the same ownership or management as the principal on the bond; and (iv) termination provisions acceptable to the commission provide that the bond and coverage thereunder shall not be terminated without 30 days' written notice to the commission.

2. The requirement of a surety bond may be waived for a licensee that (i) has and maintains an errors and omissions insurance policy, in the sum of not less than $100,000 per occurrence and $1 million for all occurrences within one year, issued by an insurer licensed in this Commonwealth or approved by the commission to issue surplus lines coverage or (ii) makes and maintains a deposit of not less than $100,000 with the State Treasurer that complies in form and amount with the requirements of § 38.2-1045 A of the Code of Virginia.

3. No such policy or bond shall be terminated and no such deposit shall be withdrawn without 30 days' prior written notice to the licensee and the commission. Termination or withdrawal without the required notice and approval of the commission shall be grounds for suspension or revocation of, or refusal to renew, a license.

K. A nonresident applicant, as a condition precedent to receiving or holding a license and in addition to all other licensing requirements, shall designate a resident of this Commonwealth as the person upon whom any process, notice, or order required or permitted by law to be served upon such nonresident viatical settlement provider may be served.

1. The licensee shall promptly notify the clerk of the commission in writing of every change in its designated agent for service of process.

2. Whenever a nonresident viatical settlement provider transacting business in this Commonwealth fails to appoint or maintain a registered agent in this Commonwealth, or whenever its registered agent cannot with reasonable diligence be found at the registered office, the clerk of the commission shall be an agent of the nonresident upon whom service may be made in accordance with § 12.1-19.1 of the Code of Virginia.

L. The commission may require such additional information as is necessary to make the findings required by subsection M of this section and to otherwise determine whether the applicant complies with the requirements of § 38.2-6002 of the Code of Virginia.

M. Upon the filing of the initial application for licensure and the payment of the nonrefundable application fee, the commission shall make such investigation of each applicant as the commission may determine to be appropriate and issue a license if it finds that the applicant: (i) has provided a detailed plan of operation; (ii) is competent and trustworthy; (iii) indicates its intention to act in good faith within the confines of the license; (iv) has a good business reputation; (v) if an individual, has had experience, training or education that qualifies him for licensure; (vi) if a resident partnership, limited liability company, or corporation, has recorded the existence of the partnership, limited liability company, or corporation pursuant to law; (vii) if a corporation, has specific authority to act as a viatical settlement provider in its charter; (viii) if a nonresident partnership, limited liability company, or corporation, has furnished proof of its authority to transact business in Virginia; and (ix) has provided an anti-fraud plan that meets the requirements of § 38.2-6011 E 2 of the Code of Virginia.

N. The commission may suspend, revoke, refuse to issue, or refuse to renew the license of a viatical settlement provider if the commission finds that the applicant or licensee has (i) made any material misrepresentation in the application; (ii) been guilty of fraudulent or dishonest practices; (iii) been subject to a final administrative action or has otherwise been shown to be untrustworthy or incompetent to act as a viatical settlement provider; (iv) demonstrated a pattern of unreasonable payments to viators; (v) been convicted of a felony or any misdemeanor involving fraud or moral turpitude; (vi) entered into any viatical settlement contract that has not been approved pursuant to this chapter; (vii) failed to honor contractual obligations set out in a viatical settlement contract; (viii) demonstrated or represented that it no longer meets the requirements for initial licensure; (ix) assigned, transferred, or pledged a viaticated policy to a person other than a viatical settlement provider licensed in this Commonwealth, a viatical settlement purchaser, a financing entity, a special purpose entity, a related provider trust, or an accredited investor or a qualified institutional buyer as described in Regulation D (17 CFR 230.501 through 17 CFR 230.508) and defined, respectively, in Rule 501 (17 CFR 230.501) and Rule 144A (17 CFR 230.144A) under the Securities Act of 1933, as amended; (x) violated any provisions of this chapter, Chapter 60 (§ 38.2-6000 et seq.) of Title 38.2 of the Code of Virginia or other applicable provisions of Title 38.2 or rules promulgated thereunder; or has in its employ any officer, partner, member, or key management personnel who has violated provisions of this chapter, Chapter 60 of Title 38.2 or other applicable provisions of Title 38.2 or is affiliated with any person who has in its employ any such officer, partner, member, or key management personnel; or (xi) renewed or requested renewal of its license before implementing the anti-fraud initiatives required by § 38.2-6011 E of the Code of Virginia.

O. No applicant to whom a license is refused after a hearing, nor any licensee whose license is revoked, shall apply again for a license under this chapter until after the expiration of a period of five years from the date of the commission's order, or such other period of time as the commission may specify in its order.

P. A licensed insurer shall be prohibited from transacting the business of a viatical settlement provider.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 20, Issue 5, eff. November 1, 2003; amended, Virginia Register Volume 37, Issue 4, eff. October 12, 2020.

14VAC5-71-35. Viatical settlement contracts and disclosure statements.

A. No viatical settlement contract, including attached riders, amendments or endorsements, and including any application used in connection with the viatical settlement contract, shall be used in this Commonwealth on or after July 1, 2003, unless the contract and the riders, amendments, endorsements and any applications have been filed with and approved by the commission.

B. Except as provided in subdivision C 1 of this section, no disclosure form shall be provided by a licensee under this chapter to a viator or proposed viator in this Commonwealth on or after July 1, 2003, unless the disclosure form has been filed with the commission by the viatical settlement provider and the viatical settlement provider has received notification of the approval of such form by the commission. The use of any disclosure form by a licensee under this chapter, except as provided in this section, shall be prohibited.

C. Before asking a viator or insured to sign any document, a licensee under this chapter shall provide the viator or the insured, or both, if the viator and the insured are different individuals, with a copy of the disclosure required by § 38.2-6007 A of the Code of Virginia.

1. A disclosure form containing wording identical to that in subdivision 2 of this subsection is deemed approved for use in Virginia in satisfaction of the § 38.2-6007 A requirements and need not be filed. In accordance with § 38.2-6007 A 8 of the Code of Virginia, disclosure to a viator shall also include distribution of a brochure describing the process of viatical settlements. The brochure entitled "Selling Your Life Insurance Policy," or its successor, developed and adopted by the NAIC shall be used unless one is developed by the commission. Unless and until a brochure is developed by the commission to satisfy the requirements of § 38.2-6007 A 8 of the Code of Virginia, the NAIC's form for the brochure is deemed approved for use in Virginia and need not be filed. Other disclosures, brochures and formats developed by the NAIC or any other source may not be used to satisfy the requirements of this section unless approved by the commission as containing substantially similar wording.

2. Whether a disclosure form contains "substantially similar" wording, as that term is used herein, shall be determined by the commission. Under no circumstances shall a disclosure form be considered to contain wording "substantially similar" unless the form addresses each and every element contained in the form contained herein.

NAME OF COMPANY LICENSED AS VIATICAL SETTLEMENT PROVIDER OR VIATICAL SETTLEMENT BROKER-AGENCY DISCLOSURE FORM

Note: When and if the broker contacts a potential viator prior to determining which viatical settlement provider he or she may contract with, the broker may use a "deemed" form with the following more generic heading and caption:

VIATICAL SETTLEMENT CONTRACT DISCLOSURE FORM

VIATICATING YOUR* LIFE INSURANCE POLICY?

*"You" or "Your" as used in this disclosure form, refers to the owner of the life insurance policy, which may or may not be the person who is insured under the policy.

Are you thinking about viaticating your life insurance policy? If you are, your decision could be a good one —or a mistake. You will not know for sure unless you carefully consider all of the options available to you and the consequences of viaticating your life insurance policy.

We are required to inform you of the following:

• Make sure you understand the facts. You should ask your insurance company to review all the possible alternatives that your life insurance policy may offer in lieu of a viatical settlement, including any accelerated death benefits or policy loans offered under your life insurance policy.

• Some or all of the proceeds of the viatical settlement may be taxable under federal income tax and state franchise and income tax laws. You should seek assistance from a professional tax advisor.

• The proceeds from a viatical settlement may be subject to the claims of creditors.

• Proceeds from a viatical settlement may adversely affect your eligibility for Medicaid or other medical assistance, government benefits, or entitlements. You should seek advice from the appropriate government agencies.

• You have the right to rescind your viatical settlement contract within 15 calendar days after you receive the viatical settlement proceeds (the rescission period).

• If the insured dies during the rescission period, the viatical settlement contract shall be deemed to have been rescinded subject to repayment of all viatical settlement proceeds, including any commissions, premiums, loans, and loan interest paid on behalf of the viator from proceeds due the viator to the viatical settlement provider or viatical settlement purchaser.

• Funds will be sent to you within three business days after your viatical settlement provider has received acknowledgement from your insurer or group administrator that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated.

• Entering into a viatical settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under your policy or certificate, to be forfeited. Assistance should be sought from a financial advisor.

Privacy Considerations

All medical, financial, or personal information solicited or obtained by a viatical settlement provider or viatical settlement broker about an insured, including the insured's identity or the identity of family members, a spouse, or a significant other may be disclosed as necessary to effect the viatical settlement between the viator and the viatical settlement provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years.

If you are the insured, both the viatical settlement provider and the viatical settlement broker may contact you to determine your health status. This contact is limited, in the aggregate, to once every three months if your life expectancy is more than one year, and no more than once per month if your life expectancy is one year or less. There are no limitations on contacts for purposes other than to determine the insured's health status.

Your Viatical Settlement Broker

• A viatical settlement broker is a person who on behalf of another and for a fee, commission, or other valuable consideration introduces viators to viatical settlement providers, or offers or attempts to negotiate viatical settlement contracts between a viator and one or more viatical settlement providers.

• Your viatical settlement broker can represent multiple parties in this transaction. He can represent you, a viatical settlement provider, or another third party. He cannot represent your insurance company when he is discussing viatical settlements.

• If you want the viatical settlement broker to act exclusively for you, you and the viatical settlement broker should execute a separate written agreement in which the viatical settlement broker (i) discloses fully all his interests in the viatical settlement contract and his relationships with the viatical settlement provider, including the viatical settlement provider's affiliates and appointed or contracted agents, and (ii) agrees that compensation for his services as a viatical settlement broker shall be paid directly and only by you.

Review all options and issues before you decide. This way you can be sure you are making a decision that is in your best interest.

D. The disclosures required by § 38.2-6007 B of the Code of Virginia shall be made to the viator and insured by or on behalf of the viatical settlement provider no later than the date on which the viatical settlement contract is signed by all parties. All or part of the disclosures may be combined and made in conjunction with the disclosures described in subsection C of this section.

E. Viatical contracts and applications for viatical settlement, regardless of the form of transmission, shall contain the following or substantially similar statements:

1. "Any person who knowingly presents false information in an application for insurance or viatical settlement contract may be guilty of a crime and subject to prosecution."

2. "Viatical settlement transactions between a viatical settlement broker or viatical settlement provider and a resident of this Commonwealth who is a viator or insured are subject to regulation by the State Corporation Commission acting through the Bureau of Insurance pursuant to provisions comprising Chapter 60 (§ 38.2-6000 et seq.) of Title 38.2 of the Code of Virginia. Any person damaged by the acts of a person in violation of this chapter may bring a civil action in a court of competent jurisdiction against the person committing the violation."

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-40. License requirements for viatical settlement brokers.

A. No person shall act as a viatical settlement broker with a resident of this Commonwealth without first obtaining a license from the commission as set forth in § 38.2-1865.1 of the Code of Virginia.

B. A viatical settlement broker shall submit an application on a form required by the commission.

C. The application shall be accompanied by a fee of $50. The license may be renewed annually by submitting a renewal form and payment of a fee of $50 on or before June 1 of each year. Failure to submit a renewal form and fee within the time prescribed shall result in an automatic expiration of the license on June 30.

D. The license shall be a limited license that allows solicitation only of viatical settlements.

E. Prelicensing examination and continuing education required of agents in §§ 38.2-1815, 38.2-1817, and 38.2-1866 of the Code of Virginia shall not apply to viatical settlement brokers.

F. The commission may require such additional information as is necessary to determine whether the applicant complies with the requirements of § 38.2-1865.1 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-50. Other requirements for viatical settlement brokers.

A. In the absence of a written agreement making the viatical settlement broker the viator's agent, viatical settlement brokers shall be presumed to be agents of viatical settlement providers.

B. Viatical settlement brokers shall not, without the written agreement of the viator obtained prior to performing any services in connection with a viatical settlement, seek or obtain any compensation from the viator.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002.

14VAC5-71-60. Standards for evaluation of reasonable payments.

A. In order to assure that viators receive a reasonable settlement for viaticating a life insurance policy, the compensation for viaticating a policy shall be no less than the following payouts for insureds who are terminally or chronically ill:

B. If the insured's life expectancy is 25 months or more, the compensation for viaticating a policy shall be at least the greater of the cash surrender value at the time of the transaction or the then available accelerated death benefit in the policy.

C. Except where the cash surrender value is paid, the percentage may be reduced by 5.0% for viaticating a policy written by an insurer rated less than the highest four categories by A.M. Best or other comparable rating agencies, based on the most recent publication of such rating agencies at the time of viatication.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-70. Reporting requirements.

A. On or before March 1 of each calendar year, each viatical settlement provider licensed in this Commonwealth shall file an annual report of all viatical settlement transactions where the viator is a resident of this Commonwealth on a form containing the following information, for the previous calendar year, for each of the viatical settlements contracted during the reporting period:

1. Date of the viatical settlement contract;

2. Life expectancy of the insured at the time of the contract, in months;

3. Face amount of the policy at the time of the contract;

4. Net death benefit viaticated;

5. Cash surrender value of the policy at time of the contract;

6. Accelerated death benefit available from the policy; and

7. Net amount paid by the viatical settlement provider to the viator to viaticate the policy.

B. In compliance with § 38.2-6011 E of the Code of Virginia, each viatical settlement provider shall certify annually to the commission the implementation of anti-fraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent viatical settlement acts. The required annual certification shall be filed on or before March 1 of each year that the viatical settlement provider is licensed in this Commonwealth. For persons licensed initially in accordance with provisions set forth in 14VAC5-71-31, the initial certification shall be filed within 60 days of initial licensure.

C. A viatical settlement provider shall report to the commission material changes in information filed with the commission at licensure, pursuant to 14VAC5-71-31 I 1, concerning the licensee's identity.

1. As used in this subsection, "material changes" means a change (i) in the name of the licensee, (ii) in the business or residence address of the licensee, (iii) in the identity, designation or official responsibilities of any director, officer, or other person who is authorized to act for or on behalf of the licensee, or (iv) in affiliation that results in any person acquiring a 10% or greater interest in the licensee or in an affiliate of the licensee.

2. A change resulting in the election or appointment of a new director or officer or in the designation of any partner, officer, member or employee that is to be authorized to act on behalf of the provider shall be reported on a form of biographical affidavit developed by the NAIC unless a more specific form is prescribed by the commission.

3. Notices of material changes required by this section shall be filed with the commission within 30 calendar days of the change.

D. A licensed viatical settlement provider convicted of a felony shall report to the commission within 30 calendar days of the conviction the facts and circumstances regarding the conviction.

E. The annual report required by subsection A of this section shall be filed with the Bureau of Insurance, marked to the attention of the Life and Health Market Regulation Division. The reports required by subsections B, C and D of this section shall be filed with the Bureau of Insurance, marked to the attention of the Financial Regulation Division.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-80. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; repealed, Virginia Register Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-90. General rules.

A. With respect to policies containing a provision for double or additional indemnity for accidental death, the additional payment shall remain payable to the beneficiary last named by the viator prior to entering into the viatical settlement contract, or to such other beneficiary, other than the viatical settlement provider, as the viator may thereafter designate, or, in the absence of a designation, to the estate of the viator.

B. Payment of the proceeds of a viatical settlement pursuant to § 38.2-6008 D of the Code of Virginia shall be by means of wire transfer to the account designated by the viator or by certified check or cashier's check made payable to the viator or his designee.

C. Payment of the proceeds pursuant to a viatical settlement shall be made in a lump sum except where, in response to the request of the viator, the viatical settlement provider has purchased an annuity issued by an insurance company licensed in this Commonwealth for the purpose of payment of the proceeds, and the insurance company agrees to make all payments directly to the viator or the viator's beneficiary. No portion of the proceeds shall be retained by the viatical settlement provider, escrow agent, or other person without the written consent of the viator.

D. Contacts for the purpose of determining the health status of the insured after the viatical settlement has occurred shall be limited, in the aggregate, to once every three months for a person with a life expectancy of more than one year and to no more than one per month for a person with a life expectancy of one year or less. Such contacts shall be made only by a licensee under this chapter or its authorized representative. As used in this section, "authorized representative" means an individual who, for or on behalf of a licensee under this chapter, contacts an insured under a viatical policy after the viatical settlement has occurred. The viatical settlement provider or viatical settlement broker shall explain the procedure for these contacts at the time the viatical settlement contract is entered into. If contact will be or is made by both the viatical settlement broker and the viatical settlement provider, both the viatical settlement broker and the viatical settlement provider shall have and maintain a system that tracks aggregate contacts.

E. If a viatical settlement provider enters into a viatical settlement that allows the viator to retain an interest in the policy, the viatical settlement contract shall contain the following provisions:

1. A provision that the viatical settlement provider will effect the transfer of the amount of the death benefit only to the extent or portion of the amount viaticated. Benefits in excess of the amount viaticated shall be paid directly to the viator's beneficiary by the insurance company;

2. A provision that the viatical settlement provider will, upon acknowledgment of the perfection of the transfer, either:

a. Advise the insured, in writing, that the insurance company has confirmed the viator's interest in the policy, or

b. Send the insured a copy of the instrument sent from the insurance company to the viatical settlement provider that acknowledges the viator's interest in the policy; and

3. A provision that apportions the premiums to be paid by the viatical settlement provider and the viator, provided that the contract provides premium payment terms and nonforfeiture options no less favorable, on a proportional basis, than those included in the policy.

F. In all cases where the insured is a minor child, disclosures to and permission of a parent or legal guardian satisfy the requirements of Chapter 60 (§ 38.2-6000 et seq.) of Title 38.2 of the Code of Virginia and the provisions of this chapter.

G. The requirements of this section supplement the general rules set forth in § 38.2-6008 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002; Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-91. Advertising.

A. As used in this section, "advertising" means any written, electronic or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet or similar communications media, including film strips, motion pictures and videos, published, disseminated, circulated or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to sell a life insurance policy pursuant to a viatical settlement contract.

B. Pursuant to § 38.2-6003 B of the Code of Virginia, the commission may require the submission, by viatical settlement providers, at any time of advertising material used or intended for use in this Commonwealth. The Bureau of Insurance will provide notification of the requirements, if any, for the filing of advertising material by administrative letter. Failure of a person to receive or review such notification shall not be cause for exemption or grounds for noncompliance with any such requirements.

C. Each viatical settlement provider shall establish and at all times maintain a system of control over the method of dissemination, content, and form of all advertisements pursuant to each viatical settlement contract entered into or effectuated in this Commonwealth. All such advertising, regardless of by whom created, designed, or presented, shall be the responsibility of the viatical settlement provider. Each viatical settlement provider under this chapter shall maintain at its home or principal office a complete file containing a specimen copy of every advertisement, as described in subsection A of this section, disseminated in this Commonwealth with a notation indicating the manner and extent of distribution and a copy of the viatical settlement contract referred to in such advertisement. The file shall be subject to inspection by the commission. All the advertisements shall be maintained in the file until the filing of the next regular report of examination of the viatical settlement provider, but no longer than five years in accordance with the provisions of Chapter 60 (§ 38.2-6000 et seq.) of Title 38.2 of the Code of Virginia. A licensee under this chapter who, after notice and hearing, is found to have violated any provision of this chapter or a cease and desist order issued by the commission with respect to any provision of this chapter shall be punished in accordance with the provisions of Chapter 5 (§ 38.2-500 et seq.) of Title 38.2 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-92. Prohibited practices.

A. A (i) viatical settlement provider or viatical settlement broker or (ii) any successor-in-interest to a viatical settlement provider that provides patient identifying information to any person or entity shall obtain from that person a signed affirmation that the person or entity will not further divulge the information without procuring the express, written consent of the insured for the disclosure. Notwithstanding the foregoing, if a person or entity referred to in clauses (i) and (ii) of this subsection is served with a subpoena and, therefore, compelled to produce records containing patient identifying information, it shall notify the viator and the insured in writing at their last known addresses within five business days after receiving notice of the subpoena.

B. A viatical settlement broker shall not, without the written agreement of the viator obtained prior to performing any services in connection with a viatical settlement, seek or obtain any compensation from the viator.

C. A viatical settlement provider or viatical settlement broker shall not discriminate in the making or soliciting of viatical settlements on the basis of race, age, sex, national origin, creed, religion, occupation, marital or family status or sexual orientation, or discriminate between viators with dependents and without dependents.

D. A viatical settlement provider or viatical settlement broker shall not pay or offer to pay any finder's fee, commission or other compensation to any viator's physician, attorney, accountant or other person providing medical, legal or financial planning services to the viator, or to any other person acting as an agent of the viator, other than a viatical settlement broker, with respect to the viatical settlement.

E. Viatical settlement providers and viatical settlement brokers shall not knowingly solicit purchasers who may have treated or have been asked to treat the illness, or who could influence the treatment of the illness, of the viators whose coverage would be the subject of investment in or purchase of a viaticated policy.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-93. Insurance company practices.

A. Life insurance companies authorized to do business in this Commonwealth shall respond to a request for verification of coverage from a viatical settlement provider or a viatical settlement broker within 30 calendar days of the date a request is received. The insurer shall complete and issue the verification of coverage to the viatical settlement provider or, in its response, indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding possible fraud or the validity of the contract, subject to the following conditions:

1. A current authorization consistent with applicable law, signed by the policy owner or certificate holder, accompanies the request.

2. In the case of an individual policy, submission of a verification of coverage form that is substantially similar to a form developed and adopted by the NAIC for such purpose or approved for such purpose by the commission, which has been completed by the viatical settlement provider or the viatical settlement broker in accordance with the instructions on the form.

3. In the case of group insurance coverage:

a. Submission of a verification of coverage form that is substantially similar to a form developed and adopted by the NAIC for such purpose or approved for such purpose by the commission, which has been completed by the viatical settlement provider or viatical settlement broker in accordance with the instructions on the form, and

b. Which has previously been referred to the group policyholder and completed to the extent the information is available to the group policyholder.

B. Nothing in this section shall prohibit a life insurance company and a viatical settlement provider or a viatical settlement broker from using another verification of coverage form that has been mutually agreed upon in writing in advance of submission of the request.

C. A life insurance company may not charge a fee for responding to a request for information from a viatical settlement provider or viatical settlement broker in compliance with this section in excess of any usual and customary charges to contract holders, certificate holders or insureds for similar services.

D. The life insurance company may send an acknowledgment of receipt of the request for verification of coverage to the policy owner or certificate holder and, where the policy owner or certificate holder is other than the insured, to the insured. The acknowledgment may contain a general description of any accelerated death benefit that is available under a provision of or rider to the life insurance contract.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 20, Issue 5, eff. November 1, 2003.

14VAC5-71-100. Severability.

If any provision of this chapter (14VAC5-71) or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances shall not be affected thereby.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 14, Issue 2, eff. October 15, 1997; amended, Virginia Register Volume 19, Issue 1, eff. September 4, 2002.

Forms (14VAC5-71)

Requirements for Operating in Virginia, SCCBO133 (eff. 1/04).

Application for License as a Viatical Settlement Provider, SCCBO134 (eff. 1/04).