Recent Structured Settlement History
It has not come as a surprise to those involved in the
industry that 2023 would show yet another increase in structured settlement
premiums. Due to increased awareness and a return to normalcy from COVID’s
court closure, 2023 would see premiums of $8.6 billion, quite a large increase
from the $6.0 billion in 2022 and the $5.6 billion average over the past two
decades.
According to National Structured Settlements Trade Association,
structured settlement premiums have more than doubled in the last two years. Many
believe recent interest rate hikes are the main driving force. Mitchel Ashley,
former NYSTLA Board Member, says “The use of structured settlements has a lot
to do with interest rates. When interest rates go high, like now, a structured
settlement is a guaranteed cash flow with no thinking component to it.”
High Interest Rates
I do not think you will find anyone that will argue that structured
settlements do not influence interest rates. At the time of the settlement, the
prevailing interest rates directly influence the growth rate of the underlying
annuity. In other words, the higher the interest rate the larger the payments
the recipient can expect and the lower the interest rate the smaller the
payments the recipient can expect.
Positive Industry Factors
What you must keep in mind is that structured settlements payments
are predictable, guaranteed, tax-free, and, some adjust to inflation. So, you can
see why the industry with this investment instrument has doubled in size in
recent years. But, there are more reasons.
According to the National Structured Settlement Trade
Association and the American Association of Settlement Consultants, the quality
and quantity of available structured settlement education has continued to
improve since virtual conferences were the only option during COVID. Several new
products have entered the market including both funding and technology products.