by John Darer CLU ChFC MSSC CeFT RSP CLTC
Colorado and Vermont are two of the latest US states to adopt the 2017 revisions to the Life & Health Guaranty Association Model Act (#520). This is great for vulnerable targeted class of structured settlement annuitants in that it reduces incentives for a vulnerable class of investors to invest in factored structured settlement payment rights in Colorado and Vermont.
Structured Settlement Investors in Colorado and Vermont and 38 other states
Structured settlement investors (people who invest in other people's structured settlement payment rights) are often sold investments scam labeled secondary market annuities. However investing in other people's structured settlements is not the same as investing in legitimate annuities,most notably the fact that, in adopted states, there is now an exclusion for structured settlement payments to which a payee, or beneficiary if the payee is deceased, has transferred their structured settlement payment rights in a structured settlement factoring transaction. The "buzz kill" for people who are already invested in other people's structured settlement payment rights is that the exclusion is applied retroactively and they have no protection in the event of insolvency of the underlying annuity issuer or bankruptcy of the qualified assignment company regardless of when thet invested.
The Lack of Safety Net Should Be a Required Disclosure for Salespersons and Fiduciary Advisers
Shouldn't any individual or company that is offering other people's structured settlement payment rights to investors include this as part of the disclaimers to any investor? It seems to me that any individual or company that has sold investors other people's structured settlement payment rights in the past, should update its investors about the new developments.
40 states in all have adopted the 2017 Life & Health Guaranty Association (#520) revisions as of June 2023, with the retro insolvency exclusion detrimental to investors, leaving ten states to go. The states with the retro exclusion presently include AK, AR, AZ, CO, CT, DE, FL, GA, IA, ID, IL, IN, KY, LA, MD, ME, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NV, OH, OK, PA, SC, SD, TN, TX, UT, VA, VT, WA, WV, and WY.
Invest wisely. The friendly faces could be your financial adviser or settlement planner. Their E&O insurance likely contains an exclusion for insolvencies.