How Safe Are Structured Settlement Payments? ::

The answer is VERY, but how do you know??

March 13, 2012 ? Structured settlement payments are issued by life insurance companies.? The primary way to measure the safety and soundness of life insurance companies is by reviewing the grades, or ratings, placed on the companies by rating agencies.? The oldest and arguably most respected insurance company rating agency is the AM Best Company. ?http://www.ambest.com/? Founded in 1899, Best rates life companies currently and previously engaged in issuing policies to fund structured settlements and has done so for many years.? The AM Best ratings of life insurance companies held up remarkably well throughout the financial crisis of 2008 into 2009, which speaks volumes about the long-term viability of these companies given that the ratings for many large financial institutions like Lehman Brothers were falling, or out-and-out failed during this timeframe.

The nature of life insurance is very different from?property and casualty (i.e. home and auto). Property and Casualty companies can and do suffer large-scale losses due to catastrophic storms, which may dramatically impact losses over a short-term period of time.? Life companies, on the other hand, are not typically impacted by large-scale?events where a significant amount of money would be paid out in a short period of time in policyholder claims.? As a result, life companies typically have a very long time horizon to invest premiums at a level sufficient to pay out future policyholders, including annuitants receiving long-term payments as a result of a structured settlement. ?While not immune to financial shocks, low returns on fixed rate investments, or simply bad investments, this long-term investment horizon allows life companies to weather short-term shocks and volatility better than financial companies.

Lastly, life companies are regulated at the state level by various state insurance commissions/departments of insurance.? These regulators are responsible for evaluating reserve adequacy, investment practices, internal controls, adherence to state laws, and basically all aspects of the company?s activities involved with issuing and administering insurance products to the public. ?Life companies are also backed by state guaranty funds.? The National Organization of Life & Health Insurance Guaranty Associations has a very informative website, which we suggest you view if you are receiving long-term-payments issued by life companies.? http://www.nolhga.com/

Structured settlements are designed to provide tax-free long-term compensation for injury victims, many of whom were minors at the time of settlement.? While nothing is guaranteed and there are a few examples of life companies defaulting ( Executive Life of NY, for example), life companies currently and previously engaged in issuing annuities to fund structured settlements remain an extremely safe bet for personal injury claimants and, by association, an attractive investment for the secondary market. Some of these companies are among the world?s largest life insurance companies and may, in the event of an extremely significant financial crisis, simply be deemed too big to fail.

We believe those receiving annuity payments as a result of structured settlements should sleep very well at night knowing that their long-term tax-free payments are extremely safe and secure.? If financial strain is an issue, it should not be due to worries about the life company.

March 13th, 2012

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Source: http://www.annuitytransfers.com/2012/03/13/how-safe-are-structured-settlement-payments/

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