Recently, the California Department of Insurance has issued “Intent to Deny” letters to at least four applicants for life settlement provider licenses based upon a “lack of financial stability.” Ironically, at the same time the Department held a pre-notice hearing to discuss its plans to seek to promulgate regulations that will set forth financial stability standards.
In an article published by The Life Settlements Report on April 4, 2012, Barger & Wolen attorney Randall Doctor examined the Department’s actions. "That's a very vague standard,” Doctor, chair of the Insurance Regulatory and Compliance Practice Group in Barger & Wolen's San Francisco office. “A state agency is subject to a duty to have consistent, objective standards to apply.”
Doctor told the publication there is no formal financial stability requirement in place, yet the Department still threatened to deny at least four provider's applications recently.
"They can't say willy-nilly, 'you lack financial stability.' They recognize they are lacking the legitimate authority to do that,” Doctor told The Life Settlements Report. “At the same time, they're denying providers on this flimsy basis.”
One of the companies opted to voluntarily withdraw its application to avoid a formal denial that could hurt its chances of getting licenses in other states, Doctor said.
Doctor notes that while the state has the legal authority to request the financial information, there is no set standard as to what constitutes “profitability.” He said that one of the providers that received notice its application would be denied, did make a profit last year, just not a big enough one, apparently. "It didn't meet the double-secret, unknown profitability standard," he said.
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