P.R. Laws tit. 26, § 4221

2019-02-20 00:00:00+00

§ 4221. Definitions

(a) Fraudulent viatical settlement acts.— Include:

(1) Acts or omissions committed by any person who, knowingly or with intent to defraud, for the purpose of depriving another of property or for profit, commits, or permits its employees or its agents to engage in acts including:

(A) Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by a viatical settlement provider, viatical settlement broker, viatical settlement purchaser, viatical settlement investment agent, financing entity, insurer, insurance producer or any other person, false material information, or concealing material information, as part of, in support of or concerning a fact material to one or more of the following:

(i) An application for the issuance of a viatical settlement or insurance policy.

(ii) The underwriting of a viatical settlement or insurance policy.

(iii) A claim for payment or benefit pursuant to a viatical settlement or insurance policy.

(iv) Premiums paid on an insurance policy.

(v) Payments and changes in ownership or beneficiary made in accordance with the terms of a viatical settlement or insurance policy.

(vi) The reinstatement or conversion of an insurance policy.

(vii) The solicitation, offer, execution or sale of a viatical settlement or insurance policy.

(viii) The issuance or disclosure of written evidence of a viatical settlement or insurance policy.

(ix) A financing transaction.

(B) Employing any device, scheme, or artifice to defraud in relation to a viaticated insurance policy.

(2) Committing or allowing its employees or agents to commit the following acts in the furtherance of a fraud or to prevent the detection of a fraud:

(A) Remove, conceal, alter, destroy or sequester from the Commissioner the assets or records of an authorized person or entity.

(B) Misrepresent or conceal the financial condition of the authorized person or entity, financing entity, insurer or other person.

(C) Transact the business of viatical settlements in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of viatical settlements.

(D) File with the Commissioner or the chief insurance regulatory officer of another jurisdiction a document containing false information or that otherwise conceals information about a material fact from the Commissioner.

(3) Embezzlement, theft, misappropriation or conversion of monies, funds, premiums, credits or other property of a viatical settlement provider, insurer, insured, viator, insurance policy owner or any other person engaged in the viatical settlement business or insurance.

(4) Recklessly entering into, brokering, or otherwise dealing in a viatical settlement, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where the viator or the viator’s agent intended to defraud the policy’s issuer. “Recklessly” means engaging in the conduct in conscious and clearly unjustifiable disregard of a substantial likelihood of the existence of the relevant facts or risks, such disregard involving a gross deviation from acceptable standards of conduct.

(5) Attempting to commit, assisting, aiding or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this subsection.

(b) Viatical settlement.— Means a written agreement executed in Puerto Rico or in any state of the United States establishing the terms under which compensation or anything of value will be paid, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the viator’s assignment, transfer, sale, devise or bequest of the death benefit or ownership of any portion of the insurance policy or certificate of insurance. A viatical settlement also includes a contract for a loan or other financing transaction with a viator secured primarily by an individual or group life insurance policy, (other than a loan by a life insurance company pursuant to the terms of the life insurance contract), or a loan secured by the cash value of a policy. A viatical settlement includes an agreement with a viator to transfer ownership or change the beneficiary designation at a later date regardless of the date that compensation is paid to the viator. Viatical settlements shall not be considered as securities as the term is defined in § 881(l) of Title 10, part of the act known as the “Uniform Securities Act of Puerto Rico”. Those viatical settlement contracts executed outside the jurisdiction of the Commonwealth of Puerto Rico, shall not be regulated by the Office of the Insurance Commissioner of Puerto Rico, yet, they shall be regulated by the Commissioner of the jurisdiction where said contract was executed, thus being established that its benefits may be sold to purchasers residing in the Commonwealth of Puerto Rico.

(c) Viatical settlement investment agent.— Means a person appointed or designated by a viatical settlement provider, who holds a license issued by the Insurance Commissioner, who solicits or arranges the funding for the purchase of a viatical settlement by the viatical settlement purchaser, and who acts on behalf of the viatical settlement provider.

(1) A viatical settlement investment agent shall have no direct contact with the viator, nor shall he/she know the identity of the viator.

(2) A viatical settlement investment agent represents the viatical settlement broker as his/her designated or retained agent.

(3) The acts of the viatical settlement investment agent in the sale or transfer of viatical settlements shall not constitute the purchase, sale or transfer of securities, as said term is defined in § 881(l) of Title 10, part of the act known as the “Uniform Securities Act of Puerto Rico”.

(d) Advertisement.— Means any written, electronic or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet or similar communications media, including film strips, motion pictures and videos, published, disseminated, circulated or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to sell a life insurance policy.

(e) Commissioner.— Means the Insurance Commissioner of Puerto Rico.

(f) Viatical settlement buyer.— Means a person who gives a sum of money to another person other than the viator or the insurer in exchange for a life insurance policy or an interest in the death benefits of a life insurance policy; or a person who owns or acquires or is entitled to a beneficial interest in a trust that owns viatical settlements or is the beneficiary of a life insurance policy that has been or shall be the subject of a viatical settlement, for the purpose of making a specific financial profit. A viatical settlement buyer does not include:

(1) A person or entity authorized to do business under this chapter;

(2) an accredited investor or qualified institutional buyer as defined respectively in the Federal Securities Act of 1933, as amended, and its regulations and §§ 851 et seq. of Title 10;

(3) a financing entity;

(4) a special purpose entity, or

(5) a related provider trust.

(g) Viatical settlement purchase agreement.— Means a contract or agreement between a viatical settlement buyer and a person other than a viator, to acquire a life insurance policy or an interest in the death benefits of a life insurance policy, or to acquire an interest in a trust that owns viatical settlements or is the beneficiary of a life insurance policy that has been or shall be the subject of a viatical settlement, with the purpose of making a specific financial profit. The purchase, sale, or transfer of a viatical settlement or any interest therein under a viatical settlement purchase agreement shall not constitute the purchase, sale, or transfer of securities, as said term is defined in § 881(l) of Title 10, known as the “Uniform Securities Act of Puerto Rico”. In order to be applicable, all life insurance policies referred to in this subtitle must have been underwritten by an insurance company that has been assigned a “Good” ranking as a minimum financial strength requirement pursuant to A.M. Best standards.

(h) Viatical settlement broker.— Means a person who on behalf of a viator and for a fee, commission or other valuable consideration offers or attempts to negotiate viatical settlements between a viator and one or more viatical settlement providers. Notwithstanding the manner in which the viatical settlement broker is compensated, a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator’s instructions and in the best interest of the viator. The term does not include an attorney, certified public accountant or a financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the viator and whose compensation is not paid directly or indirectly by the viatical settlement provider or purchaser.

(i) Chronically ill.— Means:

(1) A person unable to perform at least two (2) activities of daily living (i.e., eating, toileting, transferring, bathing, dressing or continence);

(2) a person requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment, or

(3) a person who has a level of disability similar to that described in clause (1) of this subsection as determined by the Secretary of Health.

(j) Terminally ill.— Means a person who has an illness or sickness that can reasonably be expected to result in death in twenty-four (24) months or less.

(k) Special purpose entity.— Means a corporation, partnership, trust, limited liability company or other similar entity formed solely to provide either directly or indirectly access to institutional capital markets for a financing entity or licensed viatical settlement provider.

(l) Financing entity.— Means:

(1) An underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a viatical settlement provider, credit enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject of a viatical settlement contract, but:

(A) Whose principal activity related to the transaction is providing funds to effect the viatical settlement or purchase of one or more viaticated policies, and

(B) who has an agreement in writing with one or more licensed viatical settlement providers to finance the acquisition of viatical settlements.

(2) Financing entity does not include non-accredited investors or viatical settlement purchasers.

(m) Authorized entity or person.— Means the licensed viatical settlement provider and the licensed viatical settlement broker.

(n) Viatical settlement trust.— Means a titling trust or other trust established by a licensed viatical settlement provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction. The trust shall have a written agreement with the licensed viatical settlement provider under which the licensed viatical settlement provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files related to viatical settlement transactions available to the Commissioner as if those records and files were maintained directly by the licensed viatical settlement provider.

(o) Viatical settlement business.— Means an activity involved in the offering, solicitation, negotiation, procurement, effectuation, purchasing, investing, financing, monitoring, tracking, underwriting, selling, transferring, assigning, pledging, hypothecating or in any other manner, of viatical settlements and viatical settlement purchase agreement contracts, as well as any other related activity that the Commissioner defines as such through regulations.

(p) Person.— Means a natural person or a legal entity, including, but not limited to, an individual, partnership, limited liability company, association, trust, or corporation.

(q) Policy.— Means an individual or group policy, group certificate, contract or arrangement of life insurance affecting the rights of a resident of the Commonwealth of Puerto Rico or bearing a reasonable relation to the Commonwealth of Puerto Rico, regardless of whether delivered or issued for delivery in Puerto Rico and was underwritten in the United States or in the Commonwealth of Puerto Rico.

(r) Viaticated policy.— Means a life insurance policy or certificate that has been acquired by a viatical settlement provider pursuant to a viatical settlement. The purchase, sale or transfer of a viaticated policy or viatical settlement, or any interest therein, shall not constitute the purchase, sale or transfer of securities, as said term is defined in § 881(l) of Title 10, part of the act known as the “Uniform Securities Act of Puerto Rico”.

(s) Viatical settlement provider.— Means a person, other than a viator, who enters into or executes a viatical settlement. Viatical settlement provider does not include:

(1) 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;

(2) the issuer of a life insurance policy providing accelerated benefits pursuant to the policy;

(3) an authorized or eligible insurer that provides stop loss coverage to a viatical settlement provider, purchaser, financing entity, special purpose entity or related provider trust;

(4) 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;

(5) a financing entity;

(6) a special purpose entity;

(7) a related provider trust;

(8) a viatical settlement purchaser, or

(9) an accredited investor or qualified institutional buyer as defined in the “Federal Securities Act of 1933”, as amended, and its regulations and the Uniform Securities Act of Puerto Rico, §§ 851 et seq. of Title 10, who purchases a viaticated policy from a viatical settlement provider.

(t) Viator.— Means the owner of a life insurance policy or a certificate holder under a group policy who enters or seeks to enter into a viatical settlement. For the purposes of this chapter, a viator shall not be limited to an owner of a life insurance policy or a certificate holder under a group policy insuring the life of an individual with a terminal or chronic illness or condition except where specifically addressed. “Viator” does not include: