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
- If there is a structured settlement the life insurance company is not "holding" the annuity, nor is the assignment company its holding company.
- 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.
- 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
- 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.
- 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.
- 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.
- 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
- 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
- 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.
- 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.
- 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.
- 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
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