With all the talk about too much or too little regulation of investments these days, there is one investment that supports its tough regulatory limitations: structured settlement annuities.
Why? Tight regulations give annuities one of their primary selling points: safety.
Structured settlement annuities are regulated by insurance commissioners in all 50 states. State law prevents life insurance companies from placing annuity funds in risky investments. Most of an annuity’s underlying assets are in investment-grade bonds. According to the National Structured Settlements Trade Association (NSSTA), less than five percent of annuity assets are in the stock market. These regulations keep annuities above the fray of the volatile stock and bond markets so insurance companies can make annuity payments regardless of market conditions.
To ensure their annuity obligations are well funded, insurance companies are required to indicate their future annuity payments as liabilities on their financial statements with an equal amount of corresponding assets. Insurance companies must also follow tight accounting rules, agree to mandatory annual audits and maintain minimum amounts of capital and surplus.
Since their inception in 1983, more than 500,000 injury victims have chosen to receive their settlements in tax-free annuity payments. A combination of an annuity and government securities makes the settlement package even less risky.
In these uncertain times, when the investment markets move up and down primarily on fear, there is something to be said for the safety and security of the simple annuity.
I’ve put together (with the help of Ringler Associates) a quick overview of the benefits of attorney fee structures. Go to Attorney Fee Structures for a slideshow on the topic.