by Structured Settlement Watchdog
The National Association of Insurance Commissioners (NAIC) recently published an exposure draft to Statutory Issue Paper 160 which introduces substantive revisions to SSAP No. 21—Other Admitted Assets to explicitly include accounting guidance for an insurance reporting entity that acquires (directly or indirectly) structured settlement payment rights as a result of a structured settlement factoring transaction. This item is specific for transactions that only provide a reporting entity the right to receive payments under a structured settlement and does not address situations in which the reporting entity has acquired an insurance product (e.g., life settlement, annuity, etc.
Footnote 1 states clearly “ This guidance is specific to acquired structured settlement income streams (legal right to receive future payments from a structured settlement) and does not capture accounting and reporting guidance for the acquisition of any insurance product (e.g., life settlement, annuities, etc.).
PRACTICE TIP: Implicit in the NAIC Statutory Issue Paper is that acquried structured settlement income streams are neither annuities nor insurance products
Various individuals and entities, including certain settlement planners, solicit money from investors (both plaintiffs and lawyers for plaintiffs) and market factored structured settlement payment streams (to both plaintiffs and lawyers for plaintiffs) as annuities calling them an assortment of misleading names:
- Secondary Market Annuity, or SMA
- Secondary Market Annuities, or SMA
- Secondary Market income Annuities, or SMIA
Individuals and entities who market investments in factored structured settlement payment streams to investors and call them annuities may now have a reason to be up the level of concern about their heretofore intellectually dishonest scam labeled marketing efforts.
Intellectual Dishonesty in the Solicitation and Sale of Factored Structured Settlement Receivables to Investor and Injury Victims
- Intellectual dishonesty is the advocacy of a position known to be false.
- A factored structured settlement payment stream, by whatever label, is not an annuity.
- An argument which is misused to advance an agenda or to reinforce one’s deeply held beliefs in the face of overwhelming evidence contrary.
- Despite many having insurance licenses, some of those merchants of factored structured settlement payment streams, including certain settlement planners, solicit money from investors using the term annuity, implying that factored structured settlement payment streams are a regulated insurance product when the opposite is true.
- They insinuate that such investments enjoy the same risk characteristics and statutory protections as regulated insurance products.
There is already a pending FINRA complaint filed against a former purveyor of factored structured settlement payment streams. It seems to me that companies that use the term secondary market annuity, secondary market annuities, SMA, SMIA or annuity in their websites or marketing may want to give it a serious rethink.
The National Association of Insurance Commissioners is encouraged to scrutinize the activities of licensed insurance agents and entities who (1) misuse the term annuity to insinuate an insurance product and may have even used insurance company logos to proliferate the falsehood 2) who insinuate statutory insurance protections in their websites and/or marketing materials in their solicitation of investors in conflict with prohibitions on such activity contained in state insurance laws. If the NAIC and State Attorneys General took the initiative
Related Reading
- Recycled Annuties a Bad Alternative For Funding a Structured Settlement, Says Philadelphia Lawyer to American Bar Association
- ‘Recycled Annuity’: A Misleading Phrase For A Risky Investment That No One Should Confuse With A Structured Settlement April 11, 2019 Pete Vodola, Esq.