by John Darer CLU ChFC CSSC RSP CLTC
Reduced benefit payments are set to begin November 18, 2013 as the final phase of the ELNY Restructuring Agreement is implemented by Guaranty Association Benefits Company (GABC), the successor entity to Executive Life Insurance Company of New York.
For those Defendants or insurers holding ELNY structured annuity paper (i.e. unassigned structured settlements), the so-called "trued up" payments are being released.
Structured settlement annuities issued by Executive Life Insurance Company of New York were sold between approximately 1982-1988. ELNY got into trouble with its junk bond investments and the company was seized by New York regulators in April 1991.
The important take away from the ELNY mess is that many of those experiencing shortfalls placed all of their structured settlement with a single junk bond bloated company. through their own choice, or in detrimental reliance on recommendations of their advisors, attorneys, or even judges in some cases (based on anecdotes from some affected victims). Many were seduced or blinded by above market yields that were supposedly backed by the junk bonds and the high ratings accorded by rating agencies.
In or about 2006, stories of a potential shortfall began to surface and a solution was supposedly at hand in December 2007, but that later proved to be false. The problem was then exacerbated by the 2008-2009 financial crisis and this led to the eventual liquidation of the company and the creation of GABC. Through the legal process a group of victims unsuccessfully attempted to halt the liquidation and to have alternative solutions considered.
Some victims are eligible for enhancements through the ELNY Hardship Fund, which was created with contributions from a number of life insurance companies.
The unique set of facts and circumstances that surrounded ELNY and the fact that in the aftermath of the 1991 seizure, various reforms were introduced in 1993, reduces the likelihood of a similar occurrence. The failure to adhere to the adage "don't put all your eggs in one basket" is fated to be a cited by business schools and financial texts in the years to come.