A BILL TO BE ENTITLED
AN act to provide for the protection of consumers in life settlement transactions.
The General Assembly of North Carolina enacts:
SECTION 1.  Article 58 of Chapter 58 of the General Statutes is amended by adding a new Part to read:
"Part 6. Life Settlement Transactions.
"§ 58‑58‑320.  Definitions.
For the purposes of this Part:
(1)	"Life settlement contract" means a written agreement establishing the terms under which compensation or anything of value is or will be paid, which compensation or value is less than the expected death benefits of the policy, in return for the owner's present or future assignment, transfer, sale, devise, or bequest of the death benefit or ownership of any portion of the insurance policy or certificate of insurance. However, the minimum value of a life settlement contract shall be greater than the cash surrender value or accelerated death benefit available at the time of an application for the life settlement contract. Except as provided by sub‑subdivision (3)c. of this section, "life settlement contract" also includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns the policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts.
   "Life settlement contract" includes a premium finance loan made for a life insurance policy by a lender to an owner on, before, or after the date of issuance of the policy if any of the following conditions apply:
a.	The loan proceeds are not used solely to pay (i) premiums for the policy or (ii) the costs of the loan, including, without limitation, interest, arrangement fees, utilization fees and similar fees, closing costs, legal fees and expenses, trustee fees and expenses, and third-party collateral provider fees and expenses, including fees payable to letter of credit issuers.
b.	The owner or the insured receives on the date of the premium finance loan a guarantee of a future life settlement value of the policy.
c.	The owner or the insured agrees on the date of the premium finance loan to sell the policy or any portion of its death benefit on any date following the issuance of the policy.
   "Life settlement contract" does not include any of the following:
a.	A policy loan or accelerated death benefit provision contained in the life insurance policy, whether issued with the original policy or as a rider.
b.	A loan made by a bank or other licensed financial institution in which the lender takes an interest in a life insurance policy solely to secure repayment of the loan or, if there is a default on the loan and the policy is transferred, the further assignment of the policy by the lender, provided that the default itself is not pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this Part.
c.	A loan made by a lender that does not violate Article 35 of this Chapter, provided that the premium finance loan is not described in the definition of life settlement contract above.
d.	An agreement where all the parties are closely related to the insured by blood or law or have a lawful substantial economic interest in the continued life, health, and bodily safety of the person insured, or are trusts established primarily for the benefit of the parties.
e.	Any designation, consent, or agreement by an insured who is an employee of an employer in connection with the purchase by the employer, or trust established by the employer, of life insurance on the life of the employee.
f.	A bona fide business succession planning arrangement established by any of the following:
1.	An agreement between one or more shareholders in a corporation or between a corporation and one or more of its shareholders.
2.	A trust established by shareholders of a corporation.
3.	An agreement between one or more partners in a partnership or between a partnership and one or more of its partners.
4.	A trust established by the partners of a partnership.
5.	An agreement between one or more members of a limited liability company or between a limited liability company and one or more of its members.
6.	A trust established by the members of a limited liability company.
g.	An agreement entered into by a service recipient and a service provider, a trust established by the service recipient, or a trust established by the service provider who performs significant services for the service recipient's trade or business.
h.	Any other contract, transaction, or arrangement exempted from the definition of life settlement contract by the Commissioner based on a determination that the contract, transaction, or arrangement is not of the type intended to be regulated under this Part.
(2)	"Owner" means the owner of a life insurance policy or a certificate holder under a group policy, with or without a terminal illness, who enters or seeks to enter into a life settlement contract. For the purposes of this Part, an owner shall not be limited to an owner of a life insurance policy or a certificate holder under a group policy that insures the life of an individual with a terminal or chronic illness or condition except where specifically addressed. "Owner" does not include any of the following:
a.	Any provider or other licensee under this Part.
b.	A qualified institutional buyer as defined in Rule 144A of the Federal Securities Act of 1933, as amended.
c. 	A financing entity.
d.	A special purpose entity.
e.	A related provider trust.
(3)	"Provider" means a person, other than an owner, who enters into or effectuates a life settlement contract with an owner. "Provider" does not include any of the following:
a.	Any bank, savings bank, savings and loan association, credit union, or other licensed lending institution which takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy solely as collateral for a loan.
b.	A premium finance company making premium finance loans and exempted by the Commissioner from the licensing requirement under Article 35 of this Chapter that takes an assignment of a life insurance policy solely as collateral for a loan.
c.	The issuer of the life insurance policy.
d.	Any natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of a life insurance policy or certificate issued pursuant to a group life insurance policy for compensation or anything of value less than the expected death benefit payable under the policy.
e.	A purchaser of a life settlement.
f.	Any authorized or eligible insurer that provides stop‑loss coverage or financial guaranty insurance to a provider, purchaser, financing entity, special purpose entity, or related provider trust.
g.	A financing entity.
h.	A special purpose entity.
i.	A related provider trust.
j.	A broker.
k.	An accredited investor or qualified institutional buyer as defined respectively in Regulation D, Rule 501, or Rule 144A of the Federal Securities Act of 1933, as amended, who purchases a life settlement policy from a life settlement provider."
SECTION 2.  The title of Article 58 of Chapter 58 of the General Statutes reads as rewritten:
"Article 58.

Life Insurance, Viatical Settlements, and Life Settlements."
SECTION 3.  This act becomes effective October 1, 2007.