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January 10, 2010

How Structured Settlements Work | Structured Settlement Guarantees

by John Darer® CLU ChFC MSSC RSP CLTC

What is a structured settlement guarantee?

This important question has an answer that should be part of the fundamental body of knowledge possessed by any qualified structured settlement consultant  that a lawyer, plaintiff, defendant, or insurer, chooses to engage. I continue to be disappointed when I see settlement consultants spreading inaccurate information to the public. Lawyers who then promote such inaccurate information simply foment financial illiteracy. That's not good.

Christopher R. Nicholls' NC Trial Lawyer Blog posted a piece by a North Carolina licensed insurance agent on or about September 16, 2008. It still appeared at the time of original posting. 

Here's an excerpt, followed by my comments on the inaccuracy:

"Q:  If the life insurance company holding my annuity fails, what happens to my structured settlement?   

A:  The insurance companies are subject to regulations that require them to have assets set aside and earmarked solely for the purpose of meeting their obligations to policyholders .  Even in bankruptcy, these funds are not touchable, and would still be there for the purpose of honoring their commitments.   In addition, each life company that offers structured settlement annuities provides a guarantee from their holding assignment company that the scheduled payments will be made to the claimant.  A document with the details of the guarantee are included in each structured settlement annuity policy. "

Comments

  1. If there is a structured settlement the life insurance company is not "holding" the annuity, nor is the assignment company its holding company.
  2. If your structured settlement involved a "qualified assignment"  and is funded with an annuity, THEN the annuity is "held" or "owned" by the qualified assignment company.
  3. If your structured settlement did not involve a "qualified assignment" THEN it is owned by the defendant or the defendant's insurer. Click for details of how structured settlements work, including a structured settlement flow chart/diagram
  4. When there is a qualified assignment the defendant's, or its insurer's, obligation to make periodic payments to you or your client is transferred to the qualified assignment company. This is done with your consent and knowledge and should be reflected in the settlement documents.
  5. It's important to note that with a few exceptions the qualified assignment company is a special purpose entity that only holds annuities funding the periodic payment obligations it has assumed. Thus the putative value of a putative "guarantee" from the "holding assignment company" is worthless.
  6. In the case of New York Life Insurance Company structured settlements the qualified assignment company is an actual insurance company. It is the only one. Its assumed obligations under qualified assignments are further guaranteed by the annuity issuer, New York Life Insurance Company.
  7. Most structured settlement annuity issuers guarantee the performance of the qualified assignment company by the annuity issuer.  Others offer guarantees from another member of a family of insurance companies or a guarantee from an upstream holding company. At the time of posting, all but four of the currently writing annuity issuers of structured settlements have a guarantee of the qualified assignment company by the annuity issuer.

Examples of Structured Settlement Guarantors

  1. The assumed obligations of American General Life's qualified assignment company, American General Annuity Service Corporation (AGASC), are guaranteed by AGC Life Insurance Company, an upstream holding company
  2. The assumed obligations of Pacific Life and Annuity Company's qualified assignment company, Pacific Life and Annuty Services, Inc. (PLASI) are guaranteed by Pacific Lifecorp, an upstream holding company.
  3. The assumed obligations of BHG Structured Settlements, Inc. are guaranteed by Columbia Insurance Company (and additionally, on certain large cases, Berkshire Hathaway Life Insurance Company of Nebraska.
  4. The assumed obligations of United States Life Insusrance Company in the City of New York's qualified assignment company, American General Annuity Service Corporation (AGASC) are guaranteed by AGC Life Insurance Company, an upstream holding company.
  5. The assumed obligations of Metroppolitan Tower Life Insurance Company, MetlIfe Assignment Companies, Inc. (MASCI) are guaranteed by the annuity issuer.

For a more complete current list

Structured Settlement Companies | Top Structured Settlement Companies 2023 (4structures.com)

If you would like information about a company that no longer writes structured settlement annuities, you may find this list to be helpful

Structured Settlement Annuity Company Customer Service Phone Numbers (4structures.com)

Insurance Companies in general, MAY NOT file for bankruptcy.

11 U.S.C. § 109  governs which entities are permitted to file a bankruptcy petition.  Special state and federal laws govern the liquidation or reorganization of domestic American insurers. In a U.S.context, it is inaccurate to refer to an insurer as being "bankrupt". The terms "insolvent", "in liquidation", or "in receivership" would be appropriate under some circumstances.

Last updated July 18, 2023

 

Posted at 11:56 AM in How Structured Settlements Work, Liberty Life Assurance Company of Boston, Liberty Mutual, Liberty Mutual Structured Settlements, Misinformation About Structured Settlements, NC Insurance law, NC Structured Settlements, New York Insurance Advertising, North Carolina Structured Settlements, Qualified Assignment, Qualified Assignment Company, Structured Settlement Flow Chart, Structured Settlement Guarantees, Structured Settlement Information, Structured Settlement Law, Structured Settlement Protection, Structured Settlement Watchdog®, Structured Settlements |

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Guide to Structured Settlements 2024

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  • Structured Attorney Fees for Tax Deferral for Attorney Contingency Fees
    Structured attorney fees is a financial strategy that offers a unique way to defer taxes for lawyers and law firms. Lawyers CAN structure their legal fees even if the plaintiff doesn't structure their settlement. There are multiple ways to structure your attorney fees, such as capped or uncapped index linked structured settlement annuities where payments are adjusted based on upside changes in the S&P 500 or another index, Trial Lawyers may also use a special deferred pay/deferred compensation arrangement, if market based returns returns are desired with no cap. Plan NOW for year end! Put structured attorney fee expert John Darer® on your settlement planning team in 2024.
  • Structured Settlement Annuity Company Customer Service Phone Numbers
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  • What Are Structured Settlement Annuities?
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  • History of Structured Settlements
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Qualified Settlement Funds

  • What is a Qualified Settlement Fund?
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  • Firmwide Qualified Settlement Funds Debunked
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Structured Settlement Best Practices Corner

  • New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
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  • Most states require that Testimonials represent the CURRENT opinion of the person who made the testimonial. Be prepared to back it up.
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Why Take a Structured Settlement?

  • A structured settlement offers guaranteed financial security to personal injury victims, wrongful death survivors and their families. A structured settlement involves a customized stream of payments, provides long-term stable tax-free income, for a period of years or a lifetime. Unlike other income annuities. a structured settlement annuity can have multiple payment streams to address multiple needs in a single contract.

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