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March 15, 2022

Bad News for Structured Settlement Investors as NAIC Encourages Adoption of Model Act #520

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Bad News for Structured Settlement Investors in the Event of Insolvency

On November 30, 2021, the NAIC Receivership and Insolvency (E) Task Force adopted a draft memorandum that encourages state insurance departments to review their receivership and guaranty fund laws to ensure they address: (i) conflicts of law between the guaranty fund law or the provisions of any other law; (ii) continuation of coverage; (iii) priority of distribution of estate assets; (iv) full faith and credit stays and injunctions; (v) the 2021 revisions to the Holding Company Models; (vi) treatment of workers’ compensation large deductible policies; and (vii) the 2017 revisions to the Life and Health Insurance Guaranty Association Model Act (#520).According to the Task Force, the above have been identified as critical for states’ laws with respect to multi-jurisdictional receivership

Source: Wilkie Farr & Gallagher LLP report "NAIC Report Fall National Meeting 2021" p 20 Section G (vii)

The 2017 revisions to the Life and Health Insurance Guaranty Association Model Act (#520) expressly exclude protections for structured settlement investors and provide for a retroactive exclusion that would affect structured settlement investors who acquired structured settlement payment rights in the secondary or tertiary structured settlement market prior to the effective date of the adoption of the revisons.  According to the NAIC, 34 states have adopted the 2017 revisions as of March 11 2022. These states include AK, AR, AZ, CT, DE, FL, IA, ID, IL, IN, KY, LA, MD, ME, MN, MO, MS, MT, NC, ND, NE, NH, NV, OK, PA, SC, SD, TN, TX, UT, VA,  WV, and WY.  Two more states, Washington and Rhode Island, were under consideration at the time of posting.

Source: NAIC State Legislative Brief

Given the passage of time and adoption by more states and eventually all states, investors contemplating buying other people's structured settlement payments (and those that already have) now must pay more attention to what they are buyin than ever before. 

Remember acquired structured settlement payment rights are not annuities no matter what the factoring company, intermediary or financial adviser says.

Secondary market annuity not an annuity

Posted at 02:06 AM in Arizona Settlement Planning, Buffalo Settlement Planning, Buffalo Structured Settlement Investments, Dallas Settlement Planning, Fort Worth Settlement Planning, Life & Health Guaranty Association Model Act, NAIC Receivership and Insolvency Task Force, San Francisco Settlement Planning, Secondary Market Annuities | Not Annuities | Don't Be Fooled, Structured Settlement Factoring News, Structured Settlement Payment Rights, Structured Settlement Watchdog® |

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Guide to Structured Settlements 2024

  • What is a Structured Settlement? What You Need to Know
    Structured settlements and what you need to know about them including a helpful introductory video featuring A.M. Best Client Recommended Structured Settlement Expert and Registered Settlement Planner John Darer of 4structures.com LLC
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  • Top Structured Settlement Annuity Companies 2024
    Which life insurance companies issue structured settlement annuities in 2024? A list of current structured annuity issuers, the location of their home offices and their financial ratings from A.M. Best, Moodys, Fitch, Standard & Poors and/or other Tier1 NAIC ratings, with links to their websites and other useful information. Last updated June 14, 2024
  • Treasury Funded Structured Settlements
    Treasury Funded Structured Settlements are a settlement option for the most conservative using the OTHER permissible qualified funding asset under IRC 130(d), United States Treasury Bonds in addition to, or instead of, structured settlement annuities. Treasury Funded Structured Settlements can also be used to fund installment sales, also known as structured sales and other non qualified structured settlements.
  • Compare Structured Settlement IRR to Other Settlement Alternatives
    Use the Taxable Equivalent Yield chart to help compare the Internal Rate of Return (IRR) of a structured settlement to other alternative or complementary investments. Need help with the chart? Call 4structures.com® LLC at 888-325-8640
  • Structured Settlement Payments | Types of Structured Settlements 2024
    Ways You Can Structure Your Settlement Payments in 2024. With a structured settlement you can have more than one type of payment in a single contract. Different types of structured settlement payments can be customized and combined to meet your needs on a stand-alone basis, or in conjunction with other financial products. Diversify your structured settlement, if you wish, by funding with more than one annuity issuer, with treasury funded structured settlements, index linked structured settlement payments and market based structured .
  • 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
    Receiving structured settlement payments from your own structured settlement or inherited structured settlement? You'll like this huge time saver. Click the title for a link to a comprehensive list of customer service telephone numbers that includes both current AND former structured settlement annuity issuers and reinsurers. If you have simple bank or beneficiary changes, or if the insurance company that issued the structured annuity has merged, sold or spun off its block of structured annuity business (e.g. Aviva, Allstate, Transamerica, AEGON, GE Capital, Liberty, CNA, Confederation Life), oran annuity issuer has changed its name and you're trying to track them down. Here you go! The list is regularly updated. Last updated May 20, 2024.
  • Structured Settlement Quote Lock-Ins | What You Need To Know
    What does a Structured Settlement Lock-In Mean? How do plaintiffs, defendants and insurers benefit from a structured settlement quote lock in when finalizing a settlement? How does the defendant/insurer/court benefit from using a structured settlement lock-in? Where to be careful when using structured settlement lock ins.
  • What Are Structured Settlement Annuities?
    Structured settlement annuities are annuities that can provide one or more customized annuity payment streams in a single contract. Read about structured settlement annuities here.
  • History of Structured Settlements
    Tracing the roots of structured settlements history from 1918, when Congress exempted damages for personal injury or sickness from income tax, to the establishment of structured settlements as a core personal injury settlement planning tool to the present day.
  • What Are Market Based Structured Settlements?
    Market based structured settlements are an alternative or supplementary structured settlement solution for the plaintiff, attorney or law firm that: 1. Can afford to take some market risk 2. Have discretionary settlement dollars. Claimants and attorneys alike may find that market-based structured settlements provide the opportunity to receive tax-free income, or tax-deferred income, while enjoying growth potential.
  • iStructure |Uncapped Fixed Index Structured Settlement Annuity
    iStructure is an innovative game changing fixed index structured settlement annuity for plaintiffs or attorneys. with an intermediate to long term horizon
  • Structured Settlements and Longevity Risk| What Are the Odds?
    Do your financial resources give you enough road, or will the road run out before you do? A structured settlement annuity helps mitigate the risk of outliving your savings, no matter how long you live. A structured settlement can include one or more customized payment streams and types.

Qualified Settlement Funds

  • What is a Qualified Settlement Fund?
    Qualified Settlement Funds | What You Need to Know
  • Firmwide Qualified Settlement Funds Debunked
    Firmwide qualified settlement funds have been heavily promoted to trial lawyers, but have been debunked in a detailed analysis in a July 2022 legal opinion a tax partner at the law firm of Faegre Drinker Biddle & Reath, LLP. Trial lawyers and firms who have established Firmwide QSFs or coinsidering establishing a Firmwide QSF should read the analysis as part of their evaluation.

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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
  • When it comes to settlement documents it is the ultimate responsibility of the lawyers or claims adjusters who receive input concerning the structured settlement aspects of the documents to actually read the entire document, exercise independent thought and advise their clients properly
  • Be aware that financial advisors use of testimonials is prohibited or restricted
  • 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?

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