Advocacy Update: October 22, 2007
North Carolina Law Allowing IOLI Sunsets--IOLI No Longer Permitted in NC
For More Information
Gary Sanders
703-770-8192
Despite strong opposition from North Carolina AIFA, NAIFA and our industry colleagues, in 2004 North Carolina enacted legislation broadening the state’s insurable interest law to permit investor-originated life insurance transactions, known as IOLI. Legislation supporting IOLI enables unrelated investors to use charities as a way of taking out life insurance that would otherwise be prohibited. It often takes the form of legislation to amend a state’s insurable interest law to either include non-charitable entities in the definition of “charitable organizations” that have an insurable interest in a person’s life or to expand the types of entities that are exempt from the state’s insurable interest law.
Although we were not able to stop the insurable interest law from being amended, the strength of our opposition did result in a ‘sunset” provision being added to the law, which provided that the amendments would be automatically repealed in three years unless affirmative action was taken to re-enact them. NC AIFA’s continued vigilance on this issue has paid off, as the sunset provision took effect in early October and the pro-IOLI provisions of the state’s insurable interest law were automatically deleted from the law. The net result—the NC insurable interest law is back to where it was before the 2004 amendments, and IOLI is no longer permitted in North Carolina.