SECONDARY MARKET ANNUITIES
What Are Secondary Market Annuity Payments (SMAP’s)?
Through a court approved and regulated process, PSA acquires the vested right to receive future structured settlement payments, lottery winnings, casino jackpots, and investment grade annuities from individuals who were the original recipients of the payment streams. The terms “Secondary Market Annuity Payments” or “SMAPs” refer, generally, to the acquisition or assignment of these future payment streams (not annuity contracts) to third party investors. The assignment relates only to certain payments due under the original annuity policy and not the assignment of the annuity policy or contract itself. The re-assignment of these payment streams, i.e, Secondary Market Annuity Payments, are agreed to by various highly rated insurance carriers and approved by court order. In exchange for the purchase of these future payment streams, PSA pays the original payee a lump sum of cash today. These payment streams are acquired both directly from the original payee of the stream, as well as through a network of vendors who broker the assets over to PSA and its subsidiaries. The transactions are then vetted by use of the rigorous underwriting standards of our Secondary Market Annuity Program.
At its most fundamental level, a structured settlement is a settlement of a lawsuit. Typically a plaintiff in a personal injury or workers compensation case will settle his or her claim with an insurance carrier in exchange for the promise of the insurance carrier to pay to the claimant certain sums of money over a period of years. In order to satisfy its promise, or obligation, a casualty insurer purchases from a life insurance company an annuity policy. This annuity policy in turn pays out to the original claimant the money promised by the casualty insurer in the settlement of the lawsuit. For example, John Doe is killed in an automobile accident. Mr. Doe’s wife sues the driver of the car that hit and killed Mr. Doe. In settlement of the action, the defendant’s insurance carrier, agrees to pay Mrs. Doe $2,500.00 for life with 360 of these payments guaranteed and after the 360 payment are made, $2,500.00 to Mrs. Doe for as long as she lives. In addition, the defendant’s insurance carrier agrees to pay Mrs. Doe $100,000.00 every 5 years for the thirty years, guaranteed. In this example, the casualty insurer purchases an annuity policy from a life insurance company. The annuity policy names Mrs. Doe as the payee of the payments promised originally by the casualty insurer. Mrs. Doe ends up with a structured settlement annuity being paid to her by the life insurance company and guaranteed by the casualty insurer. Structured settlements were first utilized in Canada and the United States during the 1970’s and are now part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Although some uniformity exists, each of these countries has its own definitions, rules and standards for structured settlements. In the United States, 26 USC §§ 104a, 130, and 5891 govern the tax treatment of structured settlements and the assignment of theses payment obligations to third parties. In the United States, it is currently estimated that more than $6 billion per year of new structured settlement annuity policies are written each year. Many of these settlements are created by insurance companies “in house” by using their own property and casualty sister company. Over the last 5 years, 14 companies have accounted for over 80% of the market. Of the approximately 600 producers nationwide, most write these annuities using one of the 14 major insurance companies. These major insurance companies include American International Group, Aviva, MetLife, Prudential, AEGON, ING, Hartford, Berkshire Hathaway, New York Life Insurance Company, and other similarly rated and recognized carriers.
State lottery prizes are routinely offered to the winners as an annuitized payment. The deferred payout generally involves the payment of a prize over as much as a thirty-year period with installment payment made on an annual basis to the lottery winner. Typically, a state lottery will fulfill its obligation to make the annuitized payments by the segregation and purchase of treasury securities that correlate to the maturity dates of the installment payments due to the winner. In other cases, the lottery may purchase annuities or guaranteed investment contracts issued by highly rated, nationally recognized life insurance companies such as The Prudential Insurance Company of America. PSA acquires the right to receive lottery payments directly from the state lottery, in place of the original winner, by contracting with the winner to provide that winner with a lump sum of cash today. These assignments are court ordered and acknowledged by the particular state lottery commission. The practice has been ongoing for almost two decades and there is no known instance of a default in payments under this process. In 2008, there were over 450 annuitized lottery payments won. The advertised amount of these prizes exceeded $930 million with 30% of the prizes coming from Massachusetts and 26.5% of the prizes coming from New York.
In addition to the purchase of structured settlement payment rights and lottery prizes, PSA has a vast amount of experience purchasing other types of secure annuitized payment streams such as casino jackpot winnings, non-guaranteed or life contingent structured settlements, and single premium fixed assignable annuity policies. Contact Us Today To Learn More
The team at Pacific Structured Assets have decades of combined experience processing and facilitating the acquisition of Secondary Market Annuity Payments. Every Secondary Market Annuity Payment stream is rigorously reviewed and underwritten prior to acquisition by a purchaser. Moreover, we regularly acquire additional Secondary Market Annuity Payments. If we do not currently have a Secondary Market Annuity Payment that meets your needs, we will locate one in short order. Contact us with any questions you have regarding Secondary Market Annuity Payments or any specific requests for particular Secondary Market Annuity Payments.
The team at Pacific Structured Assets have decades of combined experience processing and facilitating the acquisition of Secondary Market Annuities. Every Secondary Market Annuity is rigorously reviewed and underwritten prior to acquisition by a purchaser. Moreover, we regularly acquire additional Secondary Market Annuities. If we do not currently have a Secondary Market Annuity that meets your needs, we will locate one in short order. Contact us with any questions you have regarding Secondary Market Annuities or any specific requests for particular Secondary Market Annuities.