Historic Developments Structured Settlements: Industry Reset & Rebuild
This is the fourth and final article (Part IV) in a four part series of articles that explore the timeline of historical developments that highlight key events for the structured settlement market.
- Period One – Industry Formation
- Period Two – Market Foundation
- Period Three – Conflict, Growth, Transition
- Period Four – Industry Reset and Rebuild
PERIOD FOUR – INDUSTRY RESET AND REBUILD (2013-2019)
The industry entered this period with annual premium production at levels achieved as far back as 2000 still faced with challenges from the secondary market and historically low interest rates. An Industry Growth Initiative organized by NSSTA restored annual premium to $6 billion in 2018. Supporting that effort, NSSTA commissioned three valuable market surveys (2014). Considerable amounts of new structured settlement annuity premium emerged from MSA with CMS publishing a series of WCMSA Reference Guides in 2013. The ABLE Act (2014) opened another potential market for structured settlements. Three lawsuits were notable: Griffith v. Aviva (2018); Ezell v. Lexington (2019); and AM v. Lieff Cabraser (2019). SSP approved a set of “Settlement Planning Practice Standards” representing a new best practice model.
- 2013: Investor Bulletins – Both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) published identical investor bulletins providing advice for individuals who are contemplating selling or purchasing (as investors) structured settlement payment rights and highlight general due diligence questions they should ask.
- 2013: WCMSA Reference Guide – Thirty-three years following enactment of the MSP Act in 1980 and 12 years after CMS issued its first WCMSA memorandum in 2001, CMS published its first WCMSA Reference Guide which has been updated several times since. The Reference Guide includes multiple sections addressing structured settlements and provides an important cost advantage for using structured settlements.
- 2014: Indexed Annuity / Hardship Commutation – The Internal Revenue Service issued a Private Letter Ruling (PLR-143928-13) approving favorable tax treatment for a structured settlement annuity with annual payment adjustments based on the performance of the Standard & Poors 500 Index which also includes the possibility of a commutation by the Claimant pursuant to a Notice of Hardship Conversion.
- 2014: NSSTA Marketing Surveys – NSSTA commissioned and completed a three-part structured settlement survey conducted by CLM Advisors, of NSSTA members’ traditional sales targets: senior claims executives (Part 1); claims professionals (Part 2); and plaintiff attorneys (Part 3).
- 2014: ABLE Act – Congress enacted the “Achieving a Better Life Experience Act of 2014.” Better known as the ABLE Act, this legislation authorized states to establish programs for qualifying disabled individuals to save and accumulate money while maintaining eligibility for means-tested government programs. The 2017 Tax Cut and Jobs Act amended and improved the ABLE Act.
- 2015: NSSTA Growth Initiative – NSSTA organized and launched an Industry Growth Initiative which, directly or indirectly, resulted in an increase in industry annuity premium from 2014 of $5.2 billion to 2018 of $6.0 billion.
- 2017: SSP Practice Standards – SSP approved “Settlement Planning Practice Standards” which, according to the SSP website, represents “the level of practice that is expected of professionals engaged in settlement planning” and “are intended to apply to all of those holding themselves out as “Settlement Planners” in performing the tasks of settlement planning…”
- 2018: Griffiths v. Aviva – the parties to the Griffiths v. Aviva class action lawsuit settled concluding a dispute involving more than 4000 structured settlement payees who had entered into Capital Maintenance Agreements with annuity provider Aviva. Subsequent to Aviva selling its US operations to Athene Holding, Athene allegedly unilaterally terminated the Capital Maintenance Agreements without notice.
- 2019: Ezell v. Lexington – A U.S. Court of Appeals affirmed a U.S. District Court’s Decision to dismiss with prejudice the amended complaint in the class action lawsuit Ezell v. Lexington. In that case, the plaintiffs had alleged that American International Group and multiple subsidiaries including Lexington made fraudulent representations and committed RICO violations because, among other reasons, the life insurer that sold annuities to Lexington diverted four percent to pay commissions to pay brokers who arranged the transactions with Lexington without disclosure.
- 2019: Market yields – Market yields on U.S. Treasury securities at 30-year constant maturity hit a nadir of 1.98 percent on July 15, 2019.
- 2019: AM v. Lieff Cabraser – Although the California Court of Appeals completely exonerated a plaintiff attorney law firm in a professional malpractice case (AM v. Lieff Cabraser), the case nonetheless provides a number of “best practice” structured settlement lessons for plaintiff attorneys involved in complex personal injury settlement planning.