A.M. Best & Company has downgraded the financial strength rating of Continental Assurance Company from A (Excellent) to A-(Excellent). According to an A.M. Best press release dated February 5, 2004, the rating follow an announcement that CNA has entered into a definitive agreement to sell its individual life and annuity business to Swiss Re Life & Health America (Swiss Re). The deal is expected to close on March 31, 2004.

The downgrade may have been a catalyst to the reforming a draconian CNA claims policy in which plaintiffs desiring structured settlements were faced with a Hobson's choice of receiving a structured settlement annuity issued by Continental Assurance Company, a periodic payment certificate (that might not have qualified for protection under the provisions of many state guaranty funds) or being forced to take cash.

Certain property and casualty companies have programs similar to the now abolished CNA program. To the extent that the property and casualty company can convince the plaintiff to accept a structure from the related life company the parent company avoids disintermediation of funds. A problem exists when there is no means for diversification, the related company's rates are not competitive, the related company's financials, or those of its guarantors, do not meet acceptable standards for the risk embodied in the plaintiff's structured cash flows and, on a more human level, the plaintiff associates the defendant's insurance company with the person who did him or her harm.

As we understand the new policy, claimants involved in cases where the defendant is a CNA insured will have fewer obstacles to the competitive bidding of structured annuity rates and diversifying the qualified funding instruments used to fund their structured settlement. We applaud this change in policy although it is clear that the impetus did not come from within.