Disability Law

AIG - 2

By Patrick Hindert

This blog post continues an S2KM series about the new (post 9/16/2008) structured settlement strategic landscape - and how to grow the structured settlement market.

The structured settlement industry dodged another bullet (more like a bomb) when AIG announced on Monday September 15, 2008 that it was seeking $70 billion from the United States government to avoid bankruptcy.

• What if the United States government had decided not to bail out AIG, less than 24 hours later, on Tuesday September 16 "just hours before bankruptcy"?
• Could (can) the United States structured settlement industry survive an AIG bankruptcy?

AIG's bailout, whether or not it ultimately proves successful, represents an historic strategic moment, and opportunity, for the structured settlement industry.

What better test for the promises structured settlement agents and annuity providers have been marketing for the past 30 years:    

• Except for United States treasury obligations, life insurance annuities are among the most secure long term investments.
• Fixed annuities are especially secure because they do not depend upon the vagaries of interest rates and securities markets.
• Fixed annuities, however, require the obligating party(s) to remain in business for the duration of the annuity obligation.
• The 30 year performance record of structured settlement annuities (to date) has been close to perfection.
• With strong support from legislators, regulators and judges, the structured settlement industry has survived its worst potential disasters.
• These potential disasters include the failures of Executive Life; Confederation Life; Capital Life; and Monarch Capital.
• By contrast, the most spectacular structured settlement failures have not involved annuities.
• These failures, which include SBU and Stanwich, involved IRC 130 structured settlement treasury bond trusts - i.e. (poorly or criminally) managed assets.
• Life insurance companies that issue structured settlement annuities are regulated by state insurance departments.
• State insurance guarantee funds provide a safety net for individual company failures.
• Life insurance companies that issue structured settlement annuities, therefore, are among the strongest of the financially strong.
• If you (an injury victim) want income tax-free periodic payments with lifetime security, include a structured settlement annuity as part of your settlement plan.

There are, of course, no guarantees (to this author's knowledge) that:

• AIG and/or any of its structured settlement subsidiaries will survive;
• AIG will be able to meet it structured settlement obligations;
• AIG will be able to successfully sell its structured settlement subsidiaries;
• Any purchaser of AIG's structured settlement business will be able to fulfill AIG's existing structured settlement payment obligations;
• Any such purchaser will decide to remain in the structured settlement business.

To repeat an earlier S2KM blog post question about AIG: if you are an AIG structured settlement client, customer, stakeholder, agent, advisor - "who do you trust"?

Who do you trust to:    

• Advise you, or your client, about AIG structured settlement annuities?
• Advise you, or your client, more generally about structured settlements and/or settlement planning?

Full post as published by Beyond Structured Settlements on September 22, 2008 (boomark / email).