Litigation

1. Health of Insurer The security of the "In Force" Annuity is related to the financial health of the life insurance company that issued the annuity and its ability to pay claims on its policies and the terms of the court order that is a prerequisite to each transaction. The purchaser of the "In Force" Annuity is buying the payment rights, or a portion of the payment rights to such annuity.
2. Not Deposits "In Force" Fixed Term Annuities are not deposits and thus not insured by the FDIC.
3. Exposure to interest rate risk. If market interest rates rise, the rate of return on the annuity is locked-in. Longer term purchases are more sensitive, similar to long bonds or traditional structured settlement annuities. This can be mitigated somewhat by hedging through an "annuity ladder" by making several purchases over an extended period of time.
4. Currency Rate Risk (To Foreign Investors) Payments are made in US dollars.
5. Liquidity "In Force" annuities must be held to term and are not liquid.

The above risks are similar to the purchase of most fixed income annuities. However, most purchases of fixed annuities do not require a court order to be concluded.

So are they right for tort victims?

Let's open up the discussion with this settlement planning problem...

At least one foreign country will not extend the tax free nature of structured settlements to its citizens unless the annuity is written on the paper of an insurer that is admitted in that country. The problem is that the number of structured settlement companies is little to none. So if one of that country's citizens is injured in the United States, but they intend to return to their home country, what do they do?

Suppose a structured settlement is under consideration, to be set up in the United States with a domestic US insurer, with payments deposited to a United States depository institution as is required by the majority of the insurers issuing structured annuity contracts?

While the structured settlement payments may be income tax free under United States tax law, the foreign citizen may get hosed on his country's taxes. 4structures.com, LLC actually sought and received a tax opinion (which was negative) on this very subject from a leading international tax firm and this author spoke directly with the tax authorities in the specific country in question last year.

So suppose a structured settlement broker were to utilize a traditional structured settlement annuity under these circumstances and offer a 20 year certain level annual annuity with an internal rate of return of 3.90% OR a 20 years certain annual annuity with a 3% annual increase and an internal rate of return of 4.05% from an A+ rated leading US insurer, is that a good deal for this foreign claimant?

Thinking "out of the box", if one considers that the non US-resident foreign national would not enjoy the same tax benefits of the stuctured settlement that a United States citizen or resident foreign national would enjoy (due to the taxation in his/her own country) is the structured settlement a better solution for this plaintiff than an investment in an inforce fixed term annuity with rights to receive payments from a similar quality insurer with a locked in rate of interest that is currently a minimum of 2% higher?

This, my friends in the structured settlement industry, is the same sort of question that credentialed experienced financial planners and advisors are asking to compete with you right here, right now, TODAY.

You can do one of 3 things:

YOUR THOUGHTS? (You may reply privately, off the record, if you wish)

Also stay tuned for the podcasts which be airing on Legal Broadcast Network (LBN) shortly.