AboutScott DeMonte Expertise A notable expert in annuities, variable, fixed and equity index products, with an emphasis on variable annuity products. I can answer questions on living benefits, taxation of annuity proceeds, the risks and benefits of all annuity products. Also, with my vast experience as a financial adviser I can answer general investing questions. I will always give you the facts, good or bad.
Experience I have over 15 years experience as a financial adviser. I was also a Regional Vice President for 2 major insurance carriers, and own AnnuityIQ.com, an unbiased variable annuity rating and comparison site. A known expert in the inner workings of annuity products who has been quoted in Investment News, Consumer Reports, American Banker, Annuity Market News and other news outlets.
Expert: Scott DeMonte Date: 7/15/2008 Subject: Structured Settlement Payments
Question Scott,
With all of the economic turmoil with failed banks, I'm sure the next to go will be the insurance companies. I currently receive a structured settlement payment from Met Life. How is that payment over the next fifteen years protected and how much is protected?
Thanks in Advance
Answer Hello Kelly,
That is a very good question and one that is making me ask the same question. There have certainly been issues with this sub-prime issue within the insurance world. Security Benefit was downgraded, Lincoln National had a substantial GAAP account loss and the list goes on.
However, even with this credit crunch most insurers are well capitalized and in overall decent health. MetLife, in particular, is in very good condition so I would not worry as much about this credit crunch hurting them in the near future.
What few people realize is that, depending in what state you live, there is usually a state guarantee corporation that works similar to the FDIC, except it is on a state scale, not a national scale. If anything were to happen then that guarantee corporation would step in, but this does not guarantee all of your money and the amount covered varies state-by-state. Also, insurers are required to have adequate reserves in order to cover their obligations and here is where the rating agencies come in.
The rating agencies look at the insurers books and will rate the firm on its capitalization and reserves versus the amount on deposit. If the rating is A or higher you have very, very little to worry about and that is where MetLife is right now. If the rating was lower then you may wish to be nervous. Keep in mind that when an insurer does fail there is usually another insurer willing to buy the assets of that company and that is another fail safe for the investor.
While this is somewhat complicated it is safe to assume that insurance companies are, so far, doing fine throughout this troubled time. I would not expect to see a major default in the near future and with the items listed above it is safe to assume you are covered in some way if the worst were to happen.
I cannot guarantee that nothing will go wrong, but from what I see you will be OK for the time being. I hope this helps.
