Are Secondary Market Annuities Safe?

Safety is the first question serious investors ask about secondary market annuities, and it deserves a straight answer. The protections are real, but they are specific: they come from a court order and from the financial strength of a top-rated carrier, not from federal insurance or a guaranty fund. Understanding exactly what stands behind the payments, and what does not, is the difference between an informed purchase and a leap of faith.

Where the safety actually comes from

Two things protect a secondary market annuity, and it is worth being precise about both.

The court order. Every transfer of structured settlement payment rights is completed under a court order, reviewed against the applicable state Structured Settlement Protection Act. A judge signs off on moving the payments to a new payee, so the change of ownership is a matter of public record rather than a private agreement. That court approval is what makes the assignment enforceable.

The carrier. The payments themselves are the obligation of the insurance company that issued the original annuity, or of a state lottery. These are established, highly rated institutions such as Berkshire Hathaway, New York Life, MetLife, and Prudential. Your income depends on that issuer continuing to pay, which is why we place only top-rated carriers and show you exactly who backs a stream before you reserve it.

What secondary market annuities are not protected by

This is where honesty matters most. Secondary market annuities are not bank deposits, so they are not FDIC-insured. They are not new annuity contracts you are purchasing, so the state guaranty association coverage that can apply to an original annuity generally does not extend to the assigned payment rights. And they are not securities registered with the Securities and Exchange Commission. In short, there is no government backstop. The protection is the carrier's balance sheet and the court order, and that is the whole story.

That is not a reason to avoid the asset. It is a reason to size it correctly and to understand the trade you are making, which is the same trade every higher-yielding fixed-income instrument asks: more yield in exchange for giving up some safety or liquidity. Our page comparing secondary market annuities to CDs, Treasuries, and new annuities lays that trade out side by side.

The risks worth naming

• Carrier credit risk. Because the income is one carrier's obligation, a serious decline in that insurer's financial strength is the primary risk. It is concentrated rather than diversified, which is why the issuer's rating is central to the decision.
• Limited liquidity. There is no public market for these payment rights. A resale or reassignment to another buyer may be possible with our assistance, but neither the sale nor its price is guaranteed. These suit capital you can commit for the long term.
• Interest-rate effect on resale. Because the payments are fixed, the resale value moves inversely with prevailing rates. If you ever sell, an investor could realize a gain if rates have fallen since purchase, or a loss if they have risen.
• Mortality risk, for one category. Life-contingent payment rights continue only while the original payee lives, which is why they yield more. The streams we place are hedged with a life insurance policy, but the structure carries mortality risk that guaranteed streams do not.

What a strong track record does and does not tell you

Historically, the streams Pacific Structured Assets has placed have paid as scheduled, with no carrier defaults. That history is meaningful, but it is not a guarantee. Past performance does not guarantee future results, and the honest way to read a track record is as evidence of careful carrier selection and underwriting, not as a promise. Every file we place is examined in-house for the court order, the assignment, the carrier obligation, and the chain of title before it reaches inventory.

So, are they safe?

For the right investor, and sized correctly, a secondary market annuity is a strong, defensible holding: fixed, court-ordered income from a top-rated carrier, bought at a discount. It is not a substitute for the money you keep FDIC-insured and liquid. Many investors hold both, using insured instruments for near-term cash and payment streams for the long-dated, higher-yielding part of their fixed income. Where it fits in a portfolio is the subject of our fixed income ladder.

Frequently asked questions

What happens to my payments if the insurance carrier fails?

Your income is the carrier's obligation, so a carrier's financial strength is the key risk. Insurers are regulated at the state level and the strongest carriers carry high financial-strength ratings, but these payment rights are not FDIC-insured and generally are not covered by a state guaranty association. That is why carrier selection is central to what we do.

Are secondary market annuities a scam?

No. They are an established asset class transferred through a public, court-approved process under state law. The industry term can be confusing because you are not buying an insurance annuity contract, you are buying the court-approved right to receive an existing schedule of payments. The transparency comes from the court record and from seeing the carrier, rating, and schedule on every listing.

Can I lose money on a secondary market annuity?

If you hold to term and the carrier performs, you receive the scheduled payments that produce your yield. The main ways to be worse off are a carrier default or selling early into a higher-rate environment for less than you paid. Neither is guaranteed to happen, and both are why time horizon and carrier quality matter.

Ready to see who backs current inventory? Browse our live inventory to see the carrier, rating, and full schedule on each deal.