Executive Life of New York liquidation, a tree falling in the forest that no one hears

In case you aren't aware, Executive Life of New York, the crazy aunt in the attic of the structured settlement industry, is in the process of seeking approval to liquidate what remains of the company, after a 21 year "rehab" that by all reasonable standards was strange, to say the least. 

Unless you are an active member of the structured settlement trade association, NSSTA, one of the impacted ELNY annuity owners or an insurance industry geek, there is an excellent chance you have no clue that there is about to be the first significant shortfall in promised payments to structured settlement beneficiaries since our industry was established in the late 1970's. Our profession will be quick to point out that it only impacts 15% of the total policyholders of ELNY, but it is significant none the less and even one policyholder being impacted is one too many.

The total lack of coverage of this by the main stream financial press is amazing to say the least, as the insurance and financial industry has closed ranks with some very nervous politicians from New York State to do their best Leslie Neilsen "Naked Gun" imitation by claiming there is "nothing to see here" as the fireworks factory explodes behind him.

NSSTA has provided an information page for those who are facing a shortfall in payments to apply for assistance from the $100 million hardship fund established by the insurance industry.


However, beyond that it is slim pickings to find any meaningful in depth reporting on this issue and it is hard not to draw the conclusion that is exactly the way the structured settlement profession wants it. Lets face it, the fact that even a small number of annuity beneficiaries are going to be facing a substantial cut in benefits is not exactly a big flag we want to wave in front of past or future clients. One of our profession's proudest claims has been that no structured settlement beneficiary has ever not gotten 100% of their promised payments. This no longer is true and that is going to be an albatross around our necks for some time going forward. 

Yet what I find amazing in all of this is if you go to an industry meeting, either the SSP or NSSTA and ask brokers if THEY ever sold an ELNY contract, it's sort of like getting people to admit they voted for Nixon in 1974 after he resigned due to Watergate. No one claims they supported him, yet Nixon won 49 states and was elected in a landslide. Similarly BILLIONS of ELNY premium was written in the late 1980's and early 1990's, and thousands of annuitants are at risk of losing benefits, yet brokers are strangely silent on their role in this fiasco, as if it was someone else, way over there, who pour billions in premium into a highly risky company to fund long term life time payments and huge balloon payments at future dates, which are now coming due and can't be honored. 

As I thankfully never sold an Executive Life of NY annuity, or Executive Life of California, I have been spared the trauma of having to deal with any of my personal clients experiencing a payment shortfall. ( In fact I have old letters begging clients to not use these firms as it was clear the junk bonds supporting these annuities were built on sand.) Still, I wonder what other brokers who clearly sold a LOT of these contracts are doing to work with or service those clients who are dealing with this mess. Are they contacting them to discuss and explain options, or are they hiding in their storm bunkers hoping this all blows over and that the "industry" solves the issue and it simply goes away? I suspect the names of those facing shortfall's, who are primarily those who executed qualified assignments, are public record now and are the big settlement firms going back and cross checking to see if they can get their clients to be first in line for the hardship dollars? I would certainly hope so, but I doubt that is the case.

I wonder about a lot when it comes to ELNY, but the biggest question I have, which is only going to be answered going forward, is what kind of stain is this going to put on our profession and our foundational product, the structured settlement annuity? Obviously a huge number of safe guards and regulatory changes have been put in place since 1992, all for the protection of consumers and policy holders, and it has made the structured settlement annuity probably the single most secure insurance product available. That's all great and I share that data with clients every day.

However, to cover up or to try and minimize the impact to the ELNY beneficiaries, or to pretend this is just a tiny sliver of all annuity holders is irresponsible on the part of our profession in my opinion, and I hope that a brighter light is shown on the entire 21 year ELNY rehab process. What ever plan is approved by the Judge in NY State on the liquidation, and there are clearly no good choices at this point, that we as a profession get a full and transparent post mortem on the obvious mismanagement of the fund, so that we as advisors and stakeholders never have to repeat this process or subject any other annuitant to the fear and confusion many are facing today as this "rehab" crawls to it's painful conclusion. 

Learn more about the author of this page, Mark Wahlstrom by visiting Wahlstrom & Associates web page.

Posted on April 3, 2012 .