Actuarial Notes

Structured Settlement Annuities

By Joel Sklar · Society of Actuaries Research Institute · 2022

Study guide: Exam ILA-101

A March 2022 report prepared for use in the educational curriculum of the Society of Actuaries. It describes the main features of structured settlement annuities in North America and current actuarial practices and issues related to the product. It draws upon a study note on the same topic authored by Roger Harbin, FSA, in 1991, with perspective on the Canadian market provided by Robert Nigol.

On the syllabus

1 Overview of Structured Settlements

  • 1.1 History of Structured Settlements
  • 1.2 Forms of Benefit Payments under a Structured Settlement

2 Pricing Considerations

  • 2.1 Mortality
  • 2.2 Interest Rates
  • 2.3 Expenses and Premium Taxes
  • 2.4 Post-tax Return on Invested Surplus
  • 2.5 Administration of Pricing and Rate Changes

3 Risk Considerations

  • 3.1 Mortality Risk
  • 3.2 Interest Rate and Asset / Liability Mismatch Risk
  • 3.3 Credit Risk
  • 3.4 Impact of Benefit Escalators on Risk
  • 3.5 Risk-Based Capital

4 Reserving / Valuation Methodology

  • 4.1 Statutory Reserving
  • 4.2 GAAP Reserving

5 Other Considerations

  • 5.1 Taxation
  • 5.2 Attorneys' Fees
  • 5.3 Factoring
  • 5.4 Inflation Considerations
  • 5.5 Canadian Market

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