836-014-0270 Standards for Evaluation of Reasonable Payments; Definition of “Terminal Illness or Condition” (1) If the insured is terminally ill or chronically ill, payments under life settlement contracts must be fair and equitable and may not in any event be less than the following: Insured's Life Expectancy — Minimum Percentage of Face Value Less Outstanding Loans Received by Policyholder or Certificate Holder (a) Less than six months — 85 percent; (b) At least six but less than 12 months — 80 percent; (c) At least 12 but less than 18 months — 75 percent; (d) At least 18 but less than 24 months — 70 percent; (2) If the insured is chronically ill, payments under life settlement contracts must be fair and equitable and may not in any event be less than the following: Insured's Life Expectancy — Minimum Percentage of Face Value Less Outstanding Loans Received by Policyholder or Certificate Holder (a) At least 24 but less than 36 months — 60 percent; (b) 36 months or more – The insured must receive at least the greater of: (A) 50 percent; (B) The cash surrender value; or (C) The accelerated death benefit in the policy. (3) If the insured is not terminally ill or chronically ill, the owner must receive a reasonable return for entering into a life settlement agreement. The life settlement contract shall not provide a payment to the insured that is unreasonable or unjust. In determining whether a payment is unreasonable or unjust, the Director may consider the following factors: (a) The face amount being purchased; (b) Any policy loan in effect on the policy being purchased; (c) The life expectancy of the insured at the time of purchase; (d) The age of the insured at the time of purchase; (e) The future premiums that must be paid to minimally keep the policy in force; (f) The cash surrender value or accelerated death benefit available from the policy; (g) The method for allocating internal costs relating directly to the acquisition of this policy; (h) The payment of any commission, fee or other expense to a life settlement broker or any other external party; (i) If known, any future interest payments due for funds borrowed to purchase this policy; (j) The applicable rating at the time of purchase of the insurance company that issued the policy by a rating service generally recognized by the insurance industry, regulators and consumer groups; (k) Whether the policy is within the contestable period; and (l) Other factors that the Director considers relevant. (4) A payment may be reduced by the minimum premium required under sections (1) or (2) of this rule to keep the contract in force for the duration of the remaining life expectancy of the life that is the subject of the life settlement contract. The minimum premium includes any premiums payable for additional benefits retained at the option of the policyholder or certificate holder. Other than this allowable reduction in payment, there shall be no other retention for expenses or broker's fees that would reduce payments below the minimum levels established in sections (1) or (2) of this rule. (5) The estimated life expectancy of an insured person must be determined according to sound actuarial principles or other sound methodology acceptable to the director. Statutory/Other Authority: ORS 744.358 Statutes/Other Implemented: ORS 744.338 & 744.358 History: ID 1-2010, f. & cert. ef. 1-5-10 ID 15-2006, f. & cert. ef. 7-27-06 ID 14-1997, f. & cert. ef. 10-17-97 ID 3-1996, f. & cert. ef. 2-26-96