Structured Settlement Private Investors

Structured Settlement Private Investors

Typically an individual who works with a factoring company to end up as the final assignee of a structured settlement payment stream or secondary market annuity, are what we consider structured settlement private investors

Why do they buy secondary market annuities instead of primary market annuities? Individual choice of course based on their own financial portfolios and desires.

Certificates of Deposits are earning 1.75% on a good day if you lock your money away for 5 years, Savings accounts earn you less than 1%. However, what you really want is 8% return on your investment with less volatility than the stock market. So you start looking at this secondary market of annuities. But what does that mean, what are my guarantees, where do I start, who is on my side?

Investing in primary market annuities can be safe and earn you a modest return, but you have heard rumors of this mythical beast ” the secondary market annuity.” What is it how do I get it, and more importantly how do I make money off of it?

Secondary market investments are simply put, buying a pre-existing annuity at a present day discounted value. These future payment streams come in a variety of payment options, and if you have some flexibility they might be just what you are looking for.

You have an allocated amount of funds, and you have a basic outline of what you would like to see in a return payment stream. Now the IRS has already set the present-day value of future money, allow for some expenses like legal fees, and basic costs. Now you are ready to invest in a portfolio of future payment streams.

Typically, people are selling monthly and lump sum payments anywhere from 1 year to 20 years out, the further out the payment the better the return. Hypothetically you put $100,000 up to invest and in your portfolio, you want payments starting in 5 years and going out no further than 18 years ( your granddaughter will need college money then), and you want monthly payments of $5000 and a couple of lump-sum payments, your portfolio comes back with 10 different annuities equaling $4000 in monthly payments and 8 lump-sum payments totaling $426,000 over 13 years. That’s the concept, of course the numbers are made up, because i don’t know exactly what your guidelines are and how patient you are. So I’m not going to sit here and telling you these are hard fast numbers because, in reality, the only thing I can guarantee you is the portfolio will be made of monthly payments, guaranteed by court order, backed by insurance companies and tailored to you.

How you go about it and with whom is the deciding factor. I’m just giving an insight to what you can do. I’m not your financial planner, and don’t claim to be a commodity’s broker. That’s not what we do, other companies do though, they are easy enough to find, if you do your due diligence. Which what every investor should be doing, along with hiring an outside firm to review what someone else is selling. My grandfather always told me a fool, and his money are soon departed.

There are more intriquet details than I can express here; our goal is to break it down into more palatable terms and examples.
Factoring companies frequently selling packages of purchased structured settlements to private investors.


Cost/Time Savings, Complexity and Risk for the Casualty Insurer in dealing with the Structured Settlement Industry


The traditional justifications for casualty insurers to promote structured settlements have included saving claim costs and claim time.  These traditional justifications are counter intuitive and unsubstantiated.  The structured settlement industry, even with the Tax Relief Act of 2001 still struggles with meaningful and articulated standards, metrics and best practices over all.

  1. Cost Savings – Structured settlements typically are negotiated on a cash basis.  Few plaintiff attorneys permit their clients to accept a structured settlement costing less than the cash alternative.  Plaintiff attorneys increasingly are assisted by their own structured settlement consultants who have access to annuity rates.  Annuity costs are discussed openly in most structured settlement negotiations.  Justifications for cost savings frequently point to settlement costs that are less than preliminary reserve estimates.  It is questionable whether such “savings” are attributable to the structured settlement or to good claim practices.
  2. Time Savings – Many structured settlement participants don’t track their time.  Structured settlements involve additional information, documentation and work processes not required in a lump sum settlement.  The time inefficient process of completing structured settlement closing documentation creates a bottleneck for the entire claim management process.
  3. Balanced with these “benefits”, are the complexity and risks of structured settlements that do not occur with lump sum settlements.  Unanticipated liabilities and inefficient work processes result when defendants and casualty insurers fail to understand and properly manage the complexities and risks of their structured settlements.
  4. Defendants, including casualty insurers, purchase 100 percent of all structured settlement funding products.  They incur extra costs for structured settlements that increase general claim costs.  When issues occur following settlement, including factoring transactions or insolvencies, they are at risk for additional costs.  Beyond their concern for claimants’ welfare what favor or advantage granted in return do defendants and casualty insurers receive for promoting and agreeing to structured settlements?