Pooling of Interests
Pooling of death benefits from insurance policies became essential upon the financial collapse of Trade Partners. This collapse occurred because the funds set aside to pay premiums were depleted. With no money to pay premiums on any policy, the risk presented was that everyone would lose their entire investment.
To explain, the loss would occur because there are daily costs that someone must pay in order to recover the insurance benefits from the insurance carriers.
First, premiums have to be paid until a policy matures. In many cases, the maturity dates are well beyond the initial projected dates. This means that additional funding is necessary. In fact, if your policy is beyond the initial projected date, then you have probably already been the beneficiary of the pooling of the premium funding accounts by Trade Partners. That is, they used money from some other source to pay premiums on the policy you invested in after the portion (if any) set aside to pay premiums on your policy was exhausted.
Second, administrative efforts still have to be made. For example, premium payments have to be tracked, accounted for, and paid. Additionally, in some cases, the policies have to be transferred in ownership name from Kelco to Trade Partners. Incredibly, in many cases, Trade Partners and Kelco failed to transfer the policies to the name of Trade Partners before Kelco failed. The principals of Kelco have been found guilty of federal fraud and are awaiting sentencing. So, their assistance in correcting this problem is limited. Further, the insurance carriers often will not provide even the forms they require to permit correction.
Third, even once a policy matures, the funds remain with the carrier until the conclusion of the claims process. Thus, even if the policy in which you were told that you were investing matures, the money may remain in the insurance carriers hands for months unless someone actively pursues the collection
Fourth, there will be some policy contests. Some carriers have (and more will likely) contend that some policies were fraudulently obtained, or that a premium payment was missed (which, given the Trade Partners records is certainly a possibility). Payment on a matured policy will therefore be contested in some cases, even on policies that have passed the contestability period. Someone has to fight these contests.
The general consensus is that the policies are most valuable if the premiums are paid through maturity. This is the view of the Receivers, the Courts that have now reviewed the issue, and the vast majority of investors that have contacted the Examiner. Thus, the need to pool the policy death benefit interest because Trade Partners does not have sufficient money left to accomplish what needs to be done.
So, the AFS and Trade Partners Receivers are working together to attempt to secure funding to pay premiums from (1) the limited funds remaining in Trade Partners and related trust or escrow accounts, (2) a bank loan secured against all policies, (3) funds remitted by insurance carriers on matured policies, (4) cash value portions of policies, and, as a last resort, (5) sales of policies. It is presently believed that one or more of these methods will be successful in preventing substantial policy lapsing.
All of these methods involve a continued pooling of interests. Under such an arrangement, as policies mature, the proceeds will be collected and held for the benefit of those making claims against the estate. Once maturities create excess funding, pro-rata distributions would begin to be made, most likely in intervals.
In light of this, with respect to the pooling issue, the Examiner will be making efforts to track the status of total premiums paid, total policies lapsed, total policies matured, amounts due from carriers versus amounts collected, and estimates on funding levels necessary to have adequate reserves to permit an initial distribution. The Examiner intends to keep you updated on these efforts through tpexaminer.com.