How Structured Settlement Issuers Dealt With Pandemic Rate Drops
John Darer • March 10, 2020
Insurers Shifted to Daily Rate Pricing Model for Agile Pricing
Structured Settlement Quotes News
With fixed rate structured settlements close to returning to levels seen prior to the pandemic let's take a look at how life insurers that issue structured settlement annuities reacted in real time.
To be prudent and agile in structured settlement annuity pricing in the early months of the Covid-19 pandemic, times of unprecedented market volatility, a number of structured settlement annuity issuers such as Independent Life Insurance Company and Prudentiual Insurance Company of America shifted to daily rate pricing for all structured settlement quotes,
What is Daily Rate Structured Settlement Pricing?
Think of Daily Rates as a sort of "Blue Plate Special" or "Catch of the Day".
Bonds are an important asset carried by structured annuity issuing life insurance companies to back up their liabilities. On any given trading day, it is possible that bond rates in the open market may be more favorable than the investments (or investment assumptions) used to set the traditional "book rates" set by the insurance company. If such favorable investments are available, the insurance company may be able to buy an asset to back up a particular liability at a more favorable rate and be willing to extend a more favorable daily rate which ultimately helps to achieve a more favorable result for our clients.Generally daily rate come out in the morning. But like the blue plate special that attracts scores of tighter budget or fiscally conservative diners to lower priced meals within a restricted time periods, bond markets are fluid and it may be possible to get a better rate at different times of day. It's always worth a try. Furthermore, it is possible that a company with a large amount of surplus reserves may be inclined to extend a daily rate, for competitive reasons. In times of unprecedented volatility you might be looking at "Catch of The Hour" or "Catch of the Minute"
Legal Reserve Life Insurance Companies
The insurance companies that issue structured settlement annuities are legal reserve life insurance life insurance companies . They must carry reserves and are required must submit annual statements to state insurance regulators in each state where they are licensed to conduct business. The format and contents of the forms used are prescribed by the State Insurance Commissioners. They give a detailed report of an insurance company's financial status, an important factor in evaluating the company's solvency and compliance with the insurance laws.
Every few years, depending on a company's state law of domicile, companies operating in multiple states undergo a more detailed home office examination of its financial position. This audit is conducted by a team of State Insurance Department Examiners representing the various areas in which the company is licensed to do business. Companies licensed in a single state are subject only to an annual home office examination by their State Insurance Department.
Surplus are those assets of the insurance company that are not reserves, and are basically "stand by" assets that are available to back any future policies that the company might underwrite. Another way to look at surplus is that it represents the capacity of the insurance company to take on new business. The permitted asset rules typically do not apply to surplus, meaning that the surplus can be invested in any investment that is otherwise legal and prudent for the insurance company to invest in.
Daily rates are usually required over certain premium thresholds due to the potential impact on surplus reserves and regulatory asset/liability matching requirements. Among other reasons, diversification may be prudent to structure under these thresholds to achieve better aggregate pricing on a given case.
Are Daily Structured Settlement Quotes Always Better Than Book Settlement Annuity Quotes?
No, sometimes the structured settlement rates are worse on a daily rate basis than the book rate. Sometimes the daily rates are better only for specific types of cash flows.
Read More About Structured Settlement Quotes
The cap rate on index linked structured settlement annuities is a limit set by the insurance company on the maximum interest rate that can be credited to the annuity based on the performance of the underlying index that also helps provide the downside prtection..
Do your financial resources give you enough road, or will the road run out before you do? A structured settlement annuity helps mitigate the risk of outliving your savings, no matter how long you live. A structured settlement can inlcude one or more customized payment streams and types.
USAA Life Insurance Company, an A++ rated insurance company, issues structured settlement annuities with 1%, 2% and 3% COLAs. USAA Life structured settlements are exceptionally compatitive on lifetime benefit payments with long duration certain periods for ages under 35.
Owners of highly appreciated NY businesses or NY real estate may benefit from a structured installment sale tax deferral program as an alternative to a 1031 exchange. MetLife's structured installment sale program is now available in NY and in all 50 states. Call 888-325-8640 for more info
A qualified assignment is part of the process to establish a structured settlement that enables a Defendant, Insurer, or Qualified Settlement Fund, to achieve a complete novation of the future periodic payment claim established by suit or agreement, through a substitution of obligors.
An annuity and a structured settlement walked into a bar, how do you tell them apart? 4structures' John Darer reviews the differences for you right here.
A lifetime structured settlement annuity turns part of your settlement recovery into guaranteed income you can’t outlive that is contractually guaranteed by a regulated life insurance company. A lifetime annuity is sometimes referred to as longevity insurance.
Structured settlement annuities can be very helpful to the budgeting process by providing guaranteed income streams and deferred lump sum payments tailored to specific budget needs and time frames identified in the settlement planning process.
Structured settlement receivables are often deceptfully marketed to investors as annuities. When the originating structured settlement factoring company buys structured settlement payments in a structured settlement factoring transaction, they are buying a receivable not an annuity.
Avoid constructive receipt if a structured settllement or structured attorney fee is to be established. Care must be taken to avoid constructive receipt.
