MUTUAL BENEFITS CORPORATION
VSI Policy Maintenance Costs
The Receivership appears to be picking up momentum and that can only be for the benefit of investors for whom to be kept in the dark and fed little of substance simply adds to the agony.
One factor causing investors considerable concern was the future liability for costs or fees for maintaining the policies. The premiums are a separate factor to be calculated in due course.
The Receiver has now filed his 9th report (16th November 2005) at the court. In that report he sets out estimated costs for VSI to maintain the policies and those costs are:
- $195 per policy divided pro rata amongst all investors assigned to the policy and
- $175 per investor per policy, but multi-policy investors will pay $175 for each policy in which they have an interest.
These fees will cover one change per investor of address or beneficiary or whatever. Overseas investors will have to pay a surcharge for extra postage, extra changes will be surcharged and all these fees are subject to likely future annual increase.
The Receiver listened to representations and lobbying of interest parties and his financial advisors carried out a costs analysis to enable him in his deliberations.
The proposed notice form for dealing with the policies did require the addition of provision for costs, so now everybody knows.
Amongst its duties VSI will ‘continue to track all viators, process death benefits and provide for investor relations’.
It could have been a lot worse.
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Costa del Sol Action Group
MUTUAL BENEFITS CORPORATION
Receiver’s motion to approve notice form and to establish notice precedures
The choice is one of three:
1. Sell your interest in the policy
2. Maintain your interest in the policy and pay for its upkeep
3. Surrender the policy
Once the Preference Option forms have been approved by the Court they will be sent out either 45 days from approval or 15th January 2005 (I think they mean 2006), whichever is the later. The Receiver wants the Court to set an investor time limit of 45 days from the mailing date to complete and return the forms with the Receiver giving an additional extra written notice of 30 days.
The destiny of the policies will be decided on a majority vote in terms of investment amount.
No such notice will be sent to investors due to receive proceeds of matured policies.
If the majority decides to sell a policy it will be assigned to the Receiver who will then sell it to the highest bidder or surrender it whichever yields the best return.
If an investor wants to keep the policy but the majority wants to sell, then the investor must abide by the majority decision. However the Receiver will try to sell the investor’s interest for the best price obtainable, but if that is refused the investor’s interest will be forfeited.
This is where the spectre of the fire sale rears its head. Any purchaser will pay only a fraction of face value. The going rate for AIDS policies is 4% to 11% of face value, and for Life Settlement policies 10% to 33% of face value – and that is before costs!
If it is decided to keep a policy then the cost of administering it will be shared between the investors pro rata as the death benefit. VSI will undertake administration and overseas investors can expect to pay extra.
Investors will be notified as to when and how much is to be paid for premiums to maintain the policies. Some policies have Delayed Premium Obligations and investors in these policies will be notified when they have to pay.
VSI administration costs have to be paid otherwise the policy interests will be snuffed.
If the majority votes to keep the policy and an investor wants to sell, then the Receiver will endeavour to sell the policy interest to the other investors. The proceeds would probably be negligible especially after deduction of costs.
In essence the only viable choice is to bite the bullet and pay the premiums. Any other choice effectively wipes out the investment in its entirety.
The Receiver mentions the option of surrender which would appear to be a futile option.
In fact consideration could be given to notifying the Receiver that you are interested in buying other investors’ interests. It might be a good investment!
10th October 2005