14 Va. Admin. Code § 5-71-31

Current through Register Vol. 40, No. 22, June 17, 2024

Section 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 § 38.2-6002F 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 § 38.2-1045A 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 § 38.2-6011E 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 § 38.2-6011E 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.

14 Va. Admin. Code § 5-71-31

Derived from Virginia Register Volume 20, Issue 5, eff. November 1, 2003; Amended, Virginia Register Volume 37, Issue 04, eff. 10/12/2020.

Statutory Authority: 12.1-13 and 38.2-223 of the Code of Virginia.