by John Darer® CLU ChFC MSSC RSP CLTC
The proposed liquidation of Executive Life of New York (ELNY) has potential fall out for investors in at least one structured settlement securitization, according to "the world's oldest and most authoritative insurance rating and information source", A.M. Best Company.
In an October 11, 2011 press release A.M. Best stated that it "has placed the debt ratings on three tranches of securities issued by 321 Henderson Receivables V LLC (Series 2008-3) (the issuer), a special purpose Nevada limited liability company, under review with negative implications. The rating actions were taken on the $74,646,000 Class A-1 8.00% Fixed Rate Asset Backed Notes, Series 2008-3; the $9,389,000 Class A-2 8.00% Fixed Rate Asset Backed Notes, Series 2008-3; and the $4,695,000 Class B 10.00% Fixed Rate Asset Backed Notes, Series 2008-3.
"The rating action was attributed to the fact that the Superintendent of Insurance of the State of New York has petitioned (dated August 31, 2011) the Supreme Court of the State of New York County of Nassau for an Order of Liquidation and Approval of a Restructuring Agreement for Executive Life Insurance Company of New York (ELNY), a life insurance carrier, who issued annuities intended to cover payments to claimants under the structured settlements. Those payments were subsequently purchased by the issuer. A.M. Best believes that the Liquidation and the Restructuring Agreement indicates that ELNY's ability to meet its ongoing contract obligations will be diminished". (emphasis ours)
Some settlement purchasers such as 321 Henderson, which is affiliated with JG Wentworth, purchase structured settlement payment rights from selling annuitants and then package the cash flows for sale to other investors, including insurance companies.
According to the ELNY Schedule 1.15 156 structured settlement annuities are estimated to have been factored. Industry colleague Patrick Hindert informs us in his November 27, 2011 blog ELNY Liquidation-3. that "reliable industry sources have informed S2KM the actual number of current ELNY SSAs previously factored is considerably higher".
According to Schedule 1.15, the total percentage of each ELNY SSA contract value "protected" by ELNY's remaining assets, state guaranty fund payments plus additional enhancements varies from 34 percent to 100 percent depending upon the individual contract
For those who are interested, the September 29, 2011 A.M. Best publication "Securitization of Period-Certain and Life-Contingent Structured Settlements" may be helpful reading.
Link to information about A.M. Best credit rating methodologies