by John Darer® CLU ChFC MSSC RSP CLTC
Allstate Life Insurance Company will cease insuring new structured settlement business, Allstate announced February 20, 2013. The withdrawal applies to qualified structured settlement annuity business underwritten by Allstate Life Insurance Company and Allstate Life Insurance Company of New York and non-qualified assignment business placed through the Allstate International Assignments, Ltd facility with the same company.
What Does This Mean If You Have an Existing Structured Settlement Annuity or Funding Agreement?
If you have a structured settlement annuity or funding agreement with Allstate Life Insurance Company or Allstate Life Insurance Company of New York don't panic, Allstate IS NOT going out of business and will continue to service your accounts. Whatever you do, beware of cash now hustlers. In 2008, they came out in droves over AIG, scaring people to sell. For those who did for that reason, time has shown that they would have been better off staying put.
Historical Overview of Allstate Structured Settlements
Allstate was one of the early life insurers to enter the structured settlement space.
The company led the way in death commutation riders, agreeing to fund the ultimately successful effort to obtain a Private Letter Ruling on a New York City medical malpractice case in 1995. At issue was whether or not a commutation, elected as a provision of the settlement, in advance of a fixed and determinable event (i.e. death) would result in a taxable event due to the anti-acceleration provisions of IRC 130(c). Following the PLR, other companies followed Allstate's lead. Prior to Allstate's participation in the groundbreaking efforts, which included TSSC and my old firm Sheerin Corp, before the structured settlement secondary market was established, a minor claimant with a big structure that died prematurely would saddle their parents with a huge estate tax bill with an illiquid asset. The Federal Estate Tax exemption was only $1 million back then. While a life insurance solution is one way to mitigate estate taxes, some plaintiffs lack insurability making the strategy impractical.
The company was aggressive on its medical underwriting led by the excellent Alton Grant and was often a carrier of choice in cases involving children with catastrophic neurological injuries. The company stopped doing rated ages after getting flooded on medical underwriting requests during the amp up of Medicare Set Asides in the mid 2000s.
Allstate went out on a limb with its Advanced Funding Exchange Notice (AFEN), offering liquidity to its own structured annuitants under certain circumstances. In 2012 the company dropped its AFEN
Although it wasn't the first to enter the non-qualified assignment marketplace, Allstate improved upon it with structured sales, structured celebrity endorsement fees, structured oil and gas lease bonuses and more. It is in this area; one hopes that other players in the marketplace step up to the plate to fill the gap. The Allstate withdrawal leaves Liberty Mutual's BARCO program as the only annuity based non-qualified assignment program. National Indemnity Company (NICO), a Berkshire Hathaway company and MetLife Insurance Company of Connecticut offer periodic payment reinsurance as an alternative solution for non-qualified (taxable damages) cases where an insurer is a payer. Structured Assignments SCC offers a US Treasury Funded Structured Settlement facility and other facilities such as Kenmare Assignments Ltd offer alternative solutions.
The parent company got walloped with Hurricane Katrina and then the 2008 financial crisis. Margins were obviously squeezed. Rumors of Allstate's withdrawal persisted for several years due to rates that were not competitive for long stretch of time. Nevertheless, the program persisted, until the company made the strategic decision.
Allstate is not the first company to leave this marketplace. It is worth pointing out that Berkshire Hathaway recently returned to the market with aplomb after a 15-year absence. So did Mutual of Omaha after a shorter time away.
4structures.com® LLC wishes its friends at Allstate Structured Settlements the best. On a personal level I thank past and present Allstate structured settlement team members: Larry Dahl, Mark Mendelsohn, Andree Dalschaert, Ismael Acevedo, Kelly Newsom, John McCulloch, Dan Durbin, Brad Zander, Ellen Montgomery, Patti Nelson, Susan Clark, Yvette, Becky & Charmaine, Alton Grant, Sue Caban, Nancy Frayer and whomever I've forgot to include on this list, for their contribution to making doing business with the company a great business experience over the years.
Following its sale to entities managed by Blackstone in November 2021, Allstate Life Insurance Company is now known as Everlake Life Insurance Company.
Allstate Life Insurance Company of New York was sold to Wilton Re in March 2021.
Read more about details concerning the sale of the two former Allstate entities here