On September 11, 2008 Ohio's new law - House Bill 404 -- aimed at eliminating Stranger-Originated Life Insurance (STOLI) transactions took effect.

A hybrid of the NAIC and NCOIL Models, the Ohio law includes both a prohibition on marketing and issuing STOLI and a five-year "waiting period" before settlement of policies with STOLI characteristics.

The Ohio Department of Insurance now has additional oversight authority over life settlement brokers and providers and will require life settlement providers to submit certain data to the Department on an annual basis.

Life insurers issuing new business in Ohio will be required to report to the Ohio Department of Insurance annually about their anti-STOLI efforts and to include in their applications questions intended to identify STOLI transactions.

Compliance with these provisions is not required until after the Insurance Department issues further guidance.

The anti-STOLI provisions in H.B. 404 include a prohibition on marketing or issuing STOLI, and a five-year "waiting period" before settlement of policies with STOLI characteristics. These central provisions of the new Ohio legislation are based on concepts developed by the National Association of Insurance Commissioners (NAIC) and the National Conference of Insurance Legislators (NCOIL). But Ohio legislators developed their own legislative language implementing these concepts, and added some provisions that are unique to Ohio's anti-STOLI bill. Summary of the Ohio law.

Ohio will become the twelfth state to adopt an anti-STOLI law. In Ohio and across the county, litigation continues regarding alleged STOLI transactions.

A "Stranger-Originated Life Insurance", or "STOLI", transaction occurs when a speculator induces an unrelated person to purchase a life insurance policy that they otherwise wouldn't buy, for the sole purpose of transferring the policy or policy benefits to the speculator. The speculator profits when the insured dies.

Bricker & Eckler represents the Association of Ohio Life Insurance Companies, and was actively involved in the development of Ohio H.B. 404. For more information about STOLI, Ohio H.B. 404, and related issues, contact:
Faith Williams
Kurt Tunnell