In an important bit of news that had the potential to really paint the settlement industry in a bad light, the State of NY announced yesterday a fresh infusion of cash into the New York Liquidation Bureau to the tune of $600 million in order to shore up the obligations due on the Executive Life annuity payouts.
This has been going on behind closed doors for several months and NSSTA, The American Council of Life Insurance and other organizations worked to raise the money needed to adequately secure the future payment streams. As industry insiders know, these were the huge block of unassigned cases that were not purchased or taken over by other companies when the Executive Life deal was worked out almost 15 years ago. Therefore, what happened is that the companies that owned and guaranteed these contracts, among them Fireman's Fund, State Farm, Allstate and several big state JUA Med Mal funds had to pony up more cash to keep these paying.
This was a festering problem that could have been solved five years ago for far less money, but as with all political solutions the problem kept getting kicked forward until it had to be solved at greater cost.
The bottom line is the owners of these obligations really had no choice but to pony up the additional money as they would have had to make up any contractual shortfall on a case by case basis. By sharing in a joint solution it was probably cheaper, easier and less traumatic for the industry.
Good news all the way around, except for the companies that were sold Executive Life contracts to begin with. It was a lousy company built on a house of cards, but the greed of the casualty markets to get the lowest cost annuity, coupled with the fact that Executive Life was one of the few markets to deal with plaintiff brokers combined to create a testament to greed and foolishness on the part of our industry and it almost destroyed that concept as a result. Thankfully the settlement industry emerged stronger for the experience and now has only markets that are top quality credits writing structured settlements.
No one has lost money on a structured settlement, a fact our business can be proud of, and this deal will insure that track record continues.