Treatment of cash surrender value in policyowner bankruptcies in China

Life Insurance and Life Settlements: The Case for Health-Contingent Cash Surrender Values

We investigate why life insurance policies in practice either do not have a cash surrender value (CSV), or have CSVs that are small and are not adjusted for health status. We show that including health‐contingent CSVs in a life insurance contract causes a dynamic commitment problem, which makes it more costly up front for policyholders to purchase long‐term contracts (because some poor risks who would otherwise have lapsed can and will now capture the CSV instead). To the extent that life insurance policyholders’ incomes tend to increase over the course of the policy, policyholders are not willing to accept higher ex ante premium costs in return for the extra liquidity provided by the CSV. Because health‐contingent CSVs act in a similar way to a life settlement market, we also study the life insurers’ equilibrium choice of CSVs in the presence of a life settlement market. We find that optimally chosen CSVs can partially mitigate the consumer welfare loss caused by the settlement market (as in Daily, Hendel, and Lizzeri, 2008), but only if the CSVs are allowed to be contingent on health status.

The present system of allowing the same cash surrender values on any two policies belonging to the same generation is defective because it does not consider the possible differences in the states of health of the two policyholders who surrender their policies at the same age. The injustice towards one who is in poor health is illustrated by the fact that, while he would be charged an extra premium if he purchases another policy, he would not receive any extra surrender value if he surrenders an existing policy. The primary purpose of the typical life insurance policy is to provide for the payment of the face amount at death. Payment of a surrender value is not an inherently essential part of the contract, and may be viewed as an allowance to the policyholder in lieu of a subsequent payment of the face amount. Under this view, the surrender allowance should be equal to the net amount that the life insurance company saves by not having to pay the face amount. This net saving is the difference between (1) expenses and claims, and (2) premiums and interest from the time of surrender to the time when the policy would have otherwise matured. The actual amount of the net saving can be calculated only after the expiry

The article is devoted to the study of the features of presenting creditor claims in a bankruptcy case. The process of presenting creditors’ claims to the debtor in the property disposal procedure is considered depending on the type of creditor in the bankruptcy case. Creditors in bankruptcy proceedings for claims that arose before the date of the opening of bankruptcy proceedings are obliged to submit written statements with claims against the debtor to the commercial court, as well as documents confirming them, within 30 days from the date of the official publication of the announcement of the opening of bankruptcy proceedings. Until the debtor is declared bankrupt, disputes between the debtor and creditors who have current claims against the debtor are resolved within the bankruptcy case by considering them in the claim proceedings by the commercial court. Secured creditors are obliged to submit a statement with monetary claims against the debtor during the bankruptcy proceedings in respect of claims that are unsecured, or subject to the waiver of security. It is substantiated that the status of a creditor in a bankruptcy case in the broad sense is obtained by a person after his recognition as such in court, which is the subject of a ruling. A broad understanding refers to a creditor with the entire list of rights and obligations defined in the Code of Ukraine on Bankruptcy Procedures. In the narrow sense, a person acquires certain creditor rights even without such status acquired in court (in particular, the very submission of an application with creditor claims to the debtor leads to the emergence of certain rights for such a person, for example, the right to appeal a court ruling regarding his creditor claims). Creditor claims are presented not only in the property disposal procedure. Thus, the application for the opening of bankruptcy proceedings, filed by the creditor, indicates the amount of the creditor’s claims against the debtor, indicating separately the amount of the penalty (fine, penalty) that is subject to payment, and the resolution on the opening of bankruptcy proceedings states the recognition of the creditor’s claims and their amount. It is argued that the presentation of creditor claims to the debtor is carried out: at the stage of submitting an application to open proceedings in a bankruptcy case; in the property disposal procedure; in the liquidation procedure.

The growing popularity and rapid rise of unmanned aerial vehicles (drones) across various industries raises myriad legal, ethical and safety concerns that require a comprehensive yet pragmatic legal framework for effective governance. South Africa, with its sophisticated legal infrastructure and rapidly advancing technologies, offers an ideal context for scrutinising and comparing legal frameworks governing drone operations. This note examines the diverse applications of drones in various sectors, including private, commercial, recreational and military applications, in a context of rapid advancement in drone technology driven by artificial intelligence. The integration of drones into South African airspace brings to the fore unique challenges, including safety, security, privacy and airspace management. Existing regulations may not adequately accommodate such emerging issues in the near future. Therefore, a comprehensive re-evaluation of existing regulations is necessary if the regulatory framework is to remain relevant and effective, while accommodating rapid expansion in the country. The note’s key objective is to enhance the current drone legal framework. It comprehensively examines the regulatory framework governing the operation of drones in South Africa, and focuses on deficiencies in the current legal framework, offering valuable recommendations to tailor and refine it so as to yield comprehensive regulations that effectively govern the operation of drones in South Africa. By shedding light on the strengths and weaknesses of the existing legal framework governing drones in South Africa, as well as the law in China, Japan, the United States of America (US) and Australia, the authors endeavour to provide insights that can inform policymakers, jurists, legal professionals and stakeholders on best-practice methods to shape an environment that fosters an integration of governance and management regulatory frameworks, for the safe operation of drones, into the fabric of an evolving modern society.

A life settlement is a financial transaction by which an existing life insurance policy is sold to an investor for a greater price than its cash surrender value. In this way, the investor undertakes to pay, if any, the outstanding premiums and has the right to receive the death benefit when the insured dies. This work carries out a descriptive analysis of this type of transaction and a study of its main quantitative aspects. Thus, among other aspects, an overview of the product is offered and its main agents, the nature of the parameters involved in its value and the risks related to it are described. In regards to the quantitative point of view, a new way of analysing the sensitivity of the price of a life settlement to changes in the insured’s life expectancy is introduced. Indeed, we extend the duration and convexity indicators of Stone and Zissu (2008), which use a deterministic approach, to the analytical framework provided by the probabilistic valuation method. Then, we propose to measure the sensitivity of this product to changes in the insured’s mortality multiplier, and not in their life expectancy. The paper also describes the applicability of the new measures for risk management purposes.

Viaticals in the COVID-19 Pandemic Era

Surrender Risk in Life Insurance Policies

Sex, Lies, and Life Insurance

Life insurance and life settlement markets with overconfident policyholders

PurposeThe purpose of this paper is to explain the meaning and legal impact of two September 2011 Supreme Court of Delaware decisions regarding challenges to the validity of life insurance policies sold to investors as life settlements on the basis of a lack of an insurable interest after the expiration of the two‐year contestability period.Design/methodology/approachThe paper outlines the background, factual circumstances, and court decisions on Lincoln Nat. Life Ins. Co. v. Joseph Schlanger 2006 Ins. Trust and PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Trust.FindingsThe court certified three legal questions concerning life insurance policies sold to investors as life settlements: whether two‐year statutory contestability limits apply to insurance policies deemed void for lack of an insurable interest; whether the Delaware statute requiring an insurable interest is violated when the insured individual procures a life insurance policy on his or her own life and immediately transfers the policy to a person without an insurable interest; and whether Delaware law confers an insurable interest upon a trustee of a trust established by an individual insured when at the time of application for a life insurance policy the insured intends to transfer the beneficial interest of the trust to a third‐party having no insurable interest on the individual insured's life.Practical implicationsInvestors may require legal comfort concerning insurable interest for policies beyond the two‐year contestability period, but the Delaware court's ruling explicitly affirms the legality of selling life insurance policies to third‐party investors.Originality/valueThe paper provides expert guidance from experienced financial services lawyers.

assumption for the economic justification of the entire article. No other replacement figure is given. Consequently, the entire economic justification of the paper is based on a percentage of unknown origin. No supportive material is given as to why 20 percent was chosen. The reader has no way of knowing why 20 percent is better than 10 percent or 40 percent. At the minimum it seems the author could have made a survey of life insurance companies and obtained their estimates of the magnitude of the problem or determined the volume of disclosure forms filed with several state insurance departments. This investigation would at least give one a minimum figure from which to build. This replacement percentage is just a minor problem. The real problems with the RLI article are with the methodology of the capital budgeting model. Specifically, there are three areas of concern: the discount factors used, lack of incremental cash flow analysis, and confusion between sunk costs and salvage value. The first problem that is encountered in the RLI paper is the discount factors used on the cash surrender values (CSV) of the Columbus Mutual (CM) policy on page 216. (For the reader's convenience the first three and last two years of data from the RLI article are reproduced in this comment). In Table 1 Kensicki shows a discounted value of 145.63 in the

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In this article we deal with the problem of pricing a guaranteed life insurance participating policy, sold in the Italian market, which embeds a surrender option. This feature is an American‐style put option that enables the policyholder to sell back the contract to the insurer at the cash surrender value. Employing a recursive binomial formula patterned after the Cox, Ross, and Rubinstein (1979) discrete option pricing model we compute, first of all, the total price of the contract, which also includes a compensation for the participation feature (“participation option,” henceforth). Then this price is split into the value of three components: the basic contract, the participation option, and the surrender option. The numerical implementation of the model allows us to catch some comparative statics properties and to tackle the problem of suitably fixing the contractual parameters in order to obtain the premium computed by insurance companies according to standard actuarial practice.

解約返戻金およびその算定方法・金額については，商法には規律がなされていなかった。こんにち，低（無）解約返戻金保険，変額年金保険および市場金利連動型解約返戻金保険等が開発されるに至ったが，これらの解約返戻金算定基準は伝統的な生命保険のそれとはまったく異なるので，今般新たに成立した保険法に解約返戻金に対する規律を設けることを望む声もあった。しかしながら，結局，保険法に解約返戻金に対する規律は定められず，保険料積立金に対する規律が設けられたに過ぎない。本稿は，保険法が新たに制定されたことを契機に，商法における「被保険者ノ為メニ積立テタル金額」の意義と，解約返戻金に対する規律を再検討し，保険法下における保険料積立金に対する規律の可能性と解約返戻金に対する規律の限界を考察することを目的とするものである。