Written Statement of David M. Lewis Representing the Life Settlement Institute Before the U.S. House of Representatives Committee on Financial Services Oversight and Investigations Subcommittee

Prepared Statement
of David M. Lewis, Esq.
Representing the Life Settlement Institute

Good afternoon. My name is David Lewis and I am appearing before the committee today in my capacity as President of the Life Settlement Institute.

The Life Settlement Institute is a trade association representing the interests of institutionally funded life settlement providers.

An institutionally funded life settlement provider is a company that uses financing provided by large multi-national banks, international corporate conglomerates and insurance companies to purchase life insurance policies insuring the lives of persons over the age of 65 who are expected to live up to another 12 years.

This is a substantially different financing arrangement and target market from the viatical industry where the industry norm is to solicit money from private individuals to buy policies from terminally ill persons.

A life settlement gives policyholders an important new option to consider when planning their retirement. Typically, a person who wants to get rid of their life insurance policy can do one of two things, 1) stop paying the premium and let the policy lapse or 2) surrender the policy to the issuing insurance company for the cash surrender value. Entering into a life settlement is a new third option that allows the seller of the policy to obtain more value, on average 20% more, for their policy than they could receive from the issuing insurance company. The members of the Life Settlement Institute have pledged that they will always pay a seller of a life insurance policy more than they could have received from the issuing insurance company.

Let me share with you some real life examples of the potential benefits of a life settlement:

(Example A)

(Example B)

The Liberte Capital Group tragedy and others like it around the country have shown the need for serious and profound reform of the viatical settlement industry. The Life Settlement Institute intends to play an important part in that reform process and would like to suggest the following initiatives:

First, the amendment of the Federal Securities Act of 1933 so that the solicitation of money from private investors for the purchase of life insurance policies and the sale of viatical settlement investment contracts are securities and are regulated by the Securities and Exchange Commission. In an effort to fight the fraud that has become prevalent in the viatical settlement industry, close to 20 states have already adopted laws and regulations whereby the sale of a viatical settlement contract or an interest in a viatical settlement contract are considered securities.

Second, the passage in every state of legislation patterned after the National Association of Insurance Commissioners ("NAIC") Viatical Settlements Model Act. The NAIC Model Act provides for strong regulation of the viatical settlement industry to be conducted by the Department of Insurance in each state. Currently, only about 35 states have viatical settlement law on the books but many state viatical laws are much weaker than NAIC Model Act.

Importantly, the NAIC Model Act also includes many provisions that strongly support the use of institutional funds for the purchase of life insurance policies. We believe that the use of institutional funds, with the stringent due diligence requirements that are attendant to its use, is the best way to promote an industry that provides a valuable service to retirees and to protect sellers of policies from fraudulent business practices.

Thank you for allowing me to appear before you today.