Some of the risk associated with structured settlement payments comes from the actual insurance company writing or depositing the checks to you. Most insurance companies set up to pay deferred annuity payments have a high rating. This rating is based on the insurance companies projected ability to fulfill obligations in the future. When an insurance companies rating drops due to a concern regarding their lack of ability to make future obligations, you should be concerned about any future annuity payments you have due to you. A companies decline in their rating is one of the first signs to an outside individual that the company may be struggling financially.
On occasion a company can improve their financial status and therefore return to a high rating. Likewise, on occasion a company is unable to improve their situation and they are forced to file for bankruptcy. When a large insurance company files for bankruptcy, the judge will almost always order the insurance company into rehabilitation. During rehabilitation, they will have the assistance of financial professionals all with the primary goal of repairing the insurance companies? financial status. This is a very difficult process and will often be a stage of bankruptcy which last for several years. If rehabilitation proves to be unsuccessful after several years, the insurance company will then be ordered into liquidation. In general, liquidation is the process of moving toward the closing of the insurance company. It will include selling assets in order to meet as many current financial obligations as possible.
So what does all of this mean for you?? If your insurance company rating is decreased it will most likely mean that if you attempt to sell your payments, they will be given a lower value than if your insurance company maintained a high rating. If your insurance company goes into rehabilitation, again, the value of your payments will decrease even more. If your payments are due within the next 5 ? 10 years you will still receive may be able to sell them at a significant discount. If your insurance company goes into liquidation, you should have concern about whether you will receive the payments due to you in the future. There is a chance you will receive only a portion of what was originally scheduled to be paid to you or you may not receive any of the future payments. The best thing to do is call your insurance company and ask what their status is and ask how that status will directly affect your individual payment stream.
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