Kendall J. Burr, Thomas F.A. Hetherington, & David T. McDowell

Abstract

This article addresses whether insurable interest requirements—such as those enacted in many states to prohibit Stranger-Originated Life Insurance policies (STOLIs)—should also apply to Stranger-Originated Annuity Transactions (STATs). The article argues that they should, highlighting the inherent similarities between STATs and STOLIs and analyzing the flawed reasoning in the lone case holding that insurable interest requirements do not apply to STATs. The authors then examine various state insurance statutes and contend that many of them may already prohibit STAT contracts. In other words, the statutory framework for criminalizing STAT schemes may already exist, making the key task one for the courts, which must properly interpret and enforce these statutes.

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