The end of the calendar year sees many in the finance world cast half an eye towards the holiday season, but for many in the life settlement market, the Florida Office of Insurance Regulation (OIR) gave them extra work.
On 2nd December last year, life settlement providers registered to do business in the state received a ‘call for data’, which asked providers for a raft of information about all the life settlements they had purchased in the past six years in the state, including sensitive personal information about insureds. Bryan Nicholson, Executive Director at industry trade body the Life Insurance Settlement Association, said that there was initially a degree of uncertainty amongst its members.
“The call for data was unexpected and we had to ensure that all of our provider members who are registered in Florida – which is all of them – understood the request completely and that we were aligned in terms of our response,” he said.
The initial deadline for providers to submit their data was 21st December, 2022, later extended to 13th January, 2023, and suddenly changed the description of the request to a ‘market conduct investigation’. Concurrently, two life settlement providers, Coventry First LLC and Life Equity LLC, fought the request in court and requested that the Division of Administrative Hearings enter a voluntary dismissal to close their case. Their argument was that OIR had made an unlawful data request that wasn’t governed by a rule that had been adopted through the formal rulemaking process.
The request was later dropped entirely, although it’s unclear as to whether the legal action by Coventry and Life Equity was the driver.
“This is to advise you that relative to the Letter of Inquiry…on 29th December, 2022, the Office of Insurance Regulation has concluded the market conduct investigation and no further action is required by you at this time. Thank you for your patience, cooperation, and assistance during our investigation,” said OIR Financial Administrator Janice S. Davis in a letter dated 25th January, 2023.
Life settlement market participants are taking a close look at the call for data, and some speculate it was caused by unlicensed actors or certain practices with brokers operating in the marketplace. A source, who spoke on the condition of anonymity, said that the action taken by the OIR could be a precursor to an elevated level of interrogation in the life settlement market.
“While this recent action appears to have been undertaken hastily, and possibly improperly, based on the way the call was issued, the short deadlines, and the sudden withdraw of the action, all of which are atypical, routine market conduct examinations by several states were more common in the past and could become more common again,” he said.
As with any regulatory-based call like the one observed in December, those who have done nothing wrong should feel no alarm. While the data request was unexpected, providers that tick the regulatory boxes in their course of doing business should not be alarmed.
“The licensed, legitimate industry is very well prepared for such actions. Licensed companies are generally inclined to preserve their good standing status and protect their licenses through compliance with established regulations,” said the source. “But there are firms circumventing, misinterpreting, and in some cases breaking the laws of various states, while misleading consumers. These bad actors should absolutely be the subject of much more substantive regulatory scrutiny.”
Whether the request was dropped by the Florida OIR because of the legal action on the part of industry participants is unclear – the Florida OIR didn’t respond to a request for comment from Life Risk News before press time. But if it was, then it’s a straightforward process for it to bring the request back in future.
“The Florida OIR will likely eventually engage in rulemaking to be able to do in future what it wanted to do with the original request,” said Brian Casey, Partner and Co-Chair of the Regulatory & Transactional Insurance Practice Group with law firm Locke Lord LLP.
Market participants are going to be monitoring announcements and other FL-OIR activities with interest to see if this request does return. If it does, other states may follow suit. Indeed, others may take Florida’s lead anyway. But if that happens, then Nicholson says that the industry will be better prepared.
“The marketplace was taken aback because the request came out of the blue and there was an incredibly short initial deadline. We wanted to understand the reasons behind the request and make sure that our members were preparing – and could actually provide – everything that the OIR wanted in the event that the filings from providers were required.”
