RISKS AND UNDERWRITING
When you invest, you need to know the risks involved in the enterprise you are entering into. You need to know the lay of the land and how to minimize that risk so that you can make intelligent and informed decisions.
The team that has been assembled at PSA is here to assist you in understanding the risks associated with purchasing, buying and investing in Secondary Market Annuity Payments, including Secondary Market Structured Settlements. We, on a daily basis, strive to meticulously review and underwrite each transaction involving a Secondary Market Annuity Payment, so that no stone is left unturned. Over the past 15 years, our team has been involved with literally thousands of transaction involving Secondary Market Structured Settlements, Secondary Market Lottery Payments and Secondary Market Annuities. Thus far our record is impeccable. While we cannot guarantee the future, we can point to our record. It is spotless.
As with any investment, risks do exist when purchasing Secondary Market Annuity Payments, and the products offered by PSA are not risk free. Every investor must determine whether a particular payment stream from the Secondary Market meets their individual risk tolerance and investment objectives. Some of the risks associated with Secondary Market Annuity Payments include but are not limited to:
- The security of the annuity is directly related to the financial health of the insurance company that issued the annuity and its ability to pay claims.
- Because each assignment to you is court ordered, the security of your Secondary Market Annuity Payment investment ultimately depends upon the validity of that court order and its enforceability.
- Secondary Market Annuity Payments are not deposits and are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other federal government agency. They may be partially guaranteed by state guaranty associations but PSA makes no representations or warranties in this regard.
- Secondary Market Annuity Payments are subject to interest rate risk. Market interest rates may rise while the rate of return of a Secondary Market Annuity Payment is locked in. Fixed income investments with longer terms to maturity are usually more sensitive to changes in interest rates.
- Secondary Market Annuity Payments are monetized by U.S. Dollars. Foreign buyers may be subject to currency exchange risk.
- Secondary Market Structured Settlements, Secondary Market Lottery Payments, and Secondary Market Annuity Payments, in general, are relatively illiquid. While exit strategies are available through the use of special purpose vehicles, they are generally considered to be illiquid investments which must be held to term.
- You are not buying an existing annuity contract, but rather the right to receive payments that flow from that contract. You are therefore not protected by the terms of the contract itself and are not entitled to any benefits of the contract, but rather you are only entitled to receive the payments that flow from the annuity issuer.
PSA’s Four Point Underwriting System
Out of all of the concerns raised above, there is only one that can be controlled by PSA – the court ordered process. PSA has identified four risk factors associated with this process and has an 81 point inspection and review system in place that assures compliance of Secondary Market Annuity Payments in the following manner:
1. Does the court that issues the order approving the assignment have subject matter jurisdiction over the assignment?
2. Does the court that issues the order approving the assignment have personal jurisdiction over the parties (the original annuitant, the insurance companies involved or the state lottery commission, and any other party with a continuing right or obligation under the annuity contract or lottery award)?
3. Have the proper procedures been followed in the State Court, meaning does the assignment comply with the applicable state statute governing the assignment? In the case of structured settlement assignments, does the assignment comply with 26 USC § 5891?
4. Are you, the investor, a bona fide purchaser for value? This means that we review, in great detail, any possible competing claim to the same payment streams that you are purchasing. Reviews include UCC-1 lien searches, judgment lien searches, reviews of credit reports, review and analysis of divorce decrees and divorce property settlements, as well as a review of the underlying documents creating the asset.
We are confident in our underwriting and guaranty to buy back any purchase of assets that fails to meet our criteria. Please give us a call if you would like to know more about the process of acquiring or purchasing a Secondary Market Annuity Payments. Our experience in this area makes us nationally recognized experts in the underwriting and acquisition of Secondary Market Annuity Payments and we are happy to answer any questions you may have.