California Gov. Arnold Schwarzenegger has vetoed a bill that would have created a regulatory framework for life settlements.
The bill, SB 1543, would have enacted the Life Settlement Consumer Protection Act.
Life settlements are transactions in which a policy owner sells the coverage to a third party.
The third party then pays the premiums and becomes the beneficiary of the policy.
According to the act, beneficiaries of trusts who owned an insurance policy but didn’t have an insurable interest in the person who was covered would be violating insurable interest laws.
Also, the bill would prohibit people from soliciting life settlements unless those individuals were licensed to do so.
The proposed legislation would have specified the requirements to obtain a life settlement license, as well as disclosure requirements at the point of solicitation.
There were also other regulatory provisions to protect the confidentiality of an insured’s medical and financial information.
The governor rejected the bill, saying that its provisions were amended late in the legislative session and were therefore still subject to debate.
“For instance, it is my desire to ensure that life settlement transactions contain proper notification and disclosure to consumers,” Mr. Schwarzenegger wrote.
“I am also concerned that the final version of the bill may unfairly exclude some companies from participating in the legitimate life settlement market.”
Mr. Schwarzenegger said he believes that any outstanding issues could be resolved, and any necessary legislation could be passed next year.
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