Research On Legal Issues Of Life Insurance Securitization

Life insurance securitization,short for LIS,refers to life insurance practitioners(not limited to insurance companies)packaging and restructuring assets or risks,and to issue securities to capital market through securitization such as risk isolation,credit enhancement and so on,so as to achieve the purpose of transferring risks or allocating funds.The development history of overseas LIS reminds us that this financial innovation has provided strong financing support for the life insurance industry and greatly enhanced its underwriting capabilities.More importantly,through the transaction framework of LIS,the risks of mortality and ageing population,which are difficult to control in the life insurance industry,have been transferred to the capital market,and the healthy development of the insurance market and capital market has been truly realized.However,it should be noted that LIS is both a risk-mitigation tool and an investment tool,which complicate risks.If the legal loopholes are ignored in large-scale LIS issuance process and we fail to realize the systemic risks in LIS and the financial industry,we may incur a new round of financial crisis.In addition,LIS still has many legal and regulatory issues that need to be addressed.More than 30 years of development after the reform and opening up,China has established a pretty sound basic condition for the development of LIS.However,we must do a good job in controlling its risks and stabilize its development in China.The value of this paper is to study the legal mechanism of LIS on the basis of sorting out the LIS risk system,so that the LIS risk supervision system is constructed on a scientific basis,so as to strike a balance between the LIS market cultivation and its risk control,which in turn supports the development of LIS practice in China.When LIS is widely introduced and well-received in China,it will realize various important values including truly expanding financing channels and risk transfer in the life insurance industry,changing the insurance business model,enhancing the international competitiveness of China's insurance companies,improving the transaction structure of the financial market,and resolving the problems China faces right now like ageing crisis.Except for the introduction and conclusion,this paper can be divided into five chapters:The first chapter is LIS development overseas and introduced to China.By analyzing the development history of overseas LIS,this paper believes that driven by various factors,it presents different characteristics in different periods.Afterwards,in light of China's actual condition,It is believed that China has the necessity of introducing LIS,and there are some certain foundation,but also some obstacles.China can learn from overseas experience and improve its supervision system for LIS.The key is to improve our country's financial supervision system and formulate multi-level laws and regulations,and strengthen the work on the legal provision of the establishment,operation supervision of Special Purpose Vehicle(SPV).The second chapter focuses on the measurement and supervision of LIS risks.In order to better measure the risk of LIS,three basic principles,namely bankruptcy remote,non-true sale and credit enhancement are analyzed in the first section.The necessity of legal supervision for LIS is demonstrated from the perspective of the complexity of the LIS risks and its possible systemic risk in the financial industry.The third section focuses on laws concerning the securitization of life insurance companies in the world and holds that the supervision of SPV is the focus of LIS.However,there still are considerable problems in the legal supervision of LIS,and the relevant system still has room for improvement.The third chapter studies the legal supervision of initiators of LIS and SPVs.The first section deals with the supervision of insurance risk transfer of initiators of LIS.This article believes that initiators of LIS transfer insurance risks to SPVs,and the SPVs carry the traditional function of reinsurance transfer and risk dispersion,so SPVs can be treated as a special purpose reinsurer.Therefore,the basic legal relationship(prior to securitization)of LIS should be included in the reinsurance supervision system.The second section mainly analyzes the legal supervision of insurance practitioners' investment on LIS.Then section three and four discuss legal regulations in terms of the establishment and operation of SPVs respectively:In the legal regulations established by SPVs,the integration of the protected unit system and special purpose reinsurance company system and solvency control should be considered;The legal control in the operation of SPVs should pay attention to trust and interest rate exchange.After thorough analysis,this paper believes that LIS product meet the criteria for securities,so it needs to be supervised by securities regulatory system.The fourth chapter explores the legal control of LIS investor risk.The securitized life insurance products meet all the criteria for identification of securities,so the issuance stage of life insurance securitized products should be supervised by securities regulatory system.The second section analyzes the conflicts and integration between the confidentiality obligations of the life insurance industry and investors' right to know.This paper argues that in the special purpose vehicles(SPVs)or investors' right to know their basic assets or insurance rights undoubtedly outdo the confidentiality of insurers.Privacy is at a higher level.However,this does not necessarily negate some of the privacy concerns in the insurance industry or insurance securitization.But on the premise of ensuring investors' right to know,certain appropriate compromises can be made.In the second section,it was held that in order to control the investment risk of LIS,investors with investment intentions need to be identified in securities issuance process to determine whether they are qualified investors since life insurance securitized products issued by SPVs are treated as securities.In other words,appropriate rules for the sale of securities should be applied to protect investors of LIS.The third section mainly digs into the sales registration exemption of life insurance securitized products and related systems,we should also strengthen the control of risk in this field.The fifth chapter probes into the legal protection of policyholders' rights in LIS.After analysis in the first section,it was held that in order to achieve the purpose of transferring the embedded value of insurance business or transferring risks,a great number of insurance business transfers are required,causing changes of insurer in the primary insurance relationship,which may impair policyholders,rights and interests.Therefore,in the transfer of insurance business in the basic legal relationship of LIS,the interests of the policyholders should be protected by setting up rigorous rules of policyholder's right of objection.The second section mainly discusses the protection of policyholders' rights and interests in the securitization of policy pledge loans.It is believed that in order to prevent the insurance contract from being forfeited when the insurance contract subrogated by other beneficiary or enforced by the enforcement court,considering that China's large-scale securitization of policy pledge loans in the future,related Legislature should make full references to legislative examples like Germany,Japan and so forth,and introduce the "intervention right" of beneficiaries to protect the rights and interests of the insurance contract stakeholders.The last section talks about the protection of policyholders' rights and interests in viatical settlement securitization,and offers corresponding suggestions on viatical settlement and its legislative perfection.