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Peter Early (President of Ringler Associates – Northern New England) (guest contributor)
Although structured settlements have been a part of claims resolution in the U.S. for more than 50 years, when Congress officially recognized their value in helping claimants secure long-term financial security for an injured claimant,1 we have seen a large upswing in their popularity over the last three or four years. This resurgence reflects their appeal in a world where interest rates are elevated, with structured settlements increasing 63% from 2022 to 2023.2
Higher interest rates and increased awareness among attorneys, claims professionals and mediators, as well as several innovations and alternative period payment options, and the amount of premium placed in structures and similar products, are putting structured settlement usage on pace to hit an all-time high in 2025.
What makes structures so appealing to all these parties, and more importantly, to the claimant who is the end user of the financial product? Here’s an overview of what structures are and maybe just as importantly, what they are not – as well as some of the benefits for defendants and plaintiffs.
Simply put, a structured settlement is an alternative to a lump sum settlement, and it provides the claimant the option to receive some or all of a settlement in the form of tax-free, guaranteed, periodic payments.
Bodily Injury Cases (Non-taxable settlements) – All payments, including interest accrued on the investments if done by way of a structured settlement, are 100% exempt from all state and federal income tax.
Non-Bodily Injury Cases (Taxable settlements) – Can be structured to offer tax-deferral benefits with the same guaranteed payments and flexible designs.
A structured settlement allows the claimant to completely customize a periodic payment stream or streams that best fit their individual needs. A structure is typically a single premium fixed annuity that provides the peace of mind of knowing the exact amounts and dates future payments are scheduled.
Structured settlements often closely align with federal interest rates, so in a period of increased rates, claimants can “lock‑in” at favorable rates without having to ever worry about market instability or loss of premium. They are also offered by highly rated (A, A+, and A++) U.S.‑based life insurance markets, providing injured parties and their families financial security and the knowledge that these critical funds will be available for years to come.
Many consultants and markets also offer other alternatives that allow claimants to further customize their settlement plan, including market-based annuities, fixed-indexed products, and trust products – all of which offer additional options to diversify large settlements or give the claimant more freedom to fully craft a series of future payments tailored to their needs and aligned with their financial goals.
In addition to a fixed-rate product, there are market-based options that provide a floor but also increase based on the experience of the index the product is tied to.3 And the structured settlement also helps spread out the tax liability, which is always important to consider.4 This is especially useful in litigation involving non-physical injuries, including employment practices, as those settlements or awards are fully taxable.5
A structured settlement is not a traditional investment or financial product that anyone walking down the street can access. A structured settlement is almost always funded directly by the property and casualty insurer(s) or defendant(s) to the structured settlement issuer. Having the structure or similar product funded directly by the defendant allows the claimant(s) to avoid what the IRS has deemed constructive receipt over the settlement funds. Constructive receipt is an economic doctrine that deems a person has control over money even if it is not physically in their possession. This means any interest earned on funds they have constructive receipt over is considered income, and therefore subject to taxation. By having the annuity funded directly by the carrier or defendant, the structure bypasses constructive receipt and allows the injured party to receive the entirety of the payments (premium and interest) entirely free from taxes.
Also structured settlements are not a means to keep the carrier or defendant involved in the case, whereby they would maintain a financial or accounting liability after issuing the settlement check. Upon or before signing the check to purchase the annuity on the claimant’s behalf, the carrier or defendant signs a Qualified Assignment document, which assigns the obligation for all future payments away from the carrier and to an assignment company usually affiliated with the life insurance market issuing the annuity. This transfer of obligation allows the carrier to have the same ongoing liability as if they had settled the case for a single lump sum. The terms of the structure are memorialized in both the settlement agreement and the qualified assignment and allow all parties to understand the terms of the future periodic payments and the role of both the assignee and the assignor.
In the advent of the structured settlement industry, most often it was the defense team that brought the concept of a structured settlement to the table. Because the insurer/defendant was the one that would be funding any potential annuity, the defense would often present offers during negotiations or mediations to make their offer look as appealing as possible, use the interest to “close the gap” between the plaintiff’s demand and the current offer, and show they are considering the needs of the claimant when settling a case. These methods are still often used and are still effective.
By presenting offers that include a structured settlement, the defendant/insurer can illustrate the long-term value of a cash offer to the claimant. In the current interest rate environment, the present value of the offer can often be doubled, tripled, or even more over the period, so that would appeal to a claimant.
In many cases this allows the injured party not only to see the tax-free growth the current offer can yield over time, but also to contextualize the offer in terms that are more relatable. Lump sum offers – life changing sums of money – can lose their advantage and be overwhelming in terms of the real-world value. A more relatable offer places the same amount in a format of periodic distribution that directly addresses a claimant’s unique situation (mortgage payments, medical expenses, tuition, retirement, etc.) and can often humanize the sometimes-mechanical nature of the back-and-forth offer/demand volleying process.
Understanding how the money being offered can provide lifetime financial security and peace of mind is often just as important as the overall value of the settlement itself.
Finally, a structure provides a claims professional and defense attorney(s) with another valuable negotiation arrow in their evaluation / settlement offer / settlement conference / mediation quiver. For instance, if the current demand is out of reach for the authority of a claims handler or the value of the claim assessed by the claims team, a structure of a current offer can extend the value of the current offer by showing the claimant how the settlement can both address their needs and significantly multiply the value of the current offer. Offering a structured settlement also helps meet plaintiff expectations of a greater settlement and avoids a trial and risking a nuclear verdict.6
Experienced claims professionals and attorneys often bring settlement consultants to mediations not only to have another set of experienced eyes and ears in the room (or virtual room, in modern times) but to prepare customized, thoughtful proposals within the context of the current negotiations. By extending the value of offers and making them more relatable to plaintiffs, structures and similar products remain a vital and valuable part of the defense team’s strategy.
For all the reasons discussed, ultimately the plaintiff is the party that benefits the most. Working with a structured settlement consultant allows the plaintiff to customize a payment stream that works for their individual or family’s specific needs without having to worry about market fluctuations or a possible loss of capital. In addition, structured settlements provide the simplest ease of use of any financial vehicle, with the gains not subject to tax and accounting needs or end of year forms.
Further, because all payments are fully guaranteed, the plaintiff has peace of mind of knowing that the funds can follow them wherever they go through direct deposits and custom beneficiary designations and that their loved ones can rely on the same security and tax benefits in the event of their death.
Plaintiffs’ attorneys also enjoy structures because this option gives their clients financial security and maximizes the result of the settlement. Many attorneys even opt to structure a portion of their attorney fees, which is allowed on any case for which an attorney is receiving a contingency fee on a 100% tax-deferred basis.
As with any investment option, tax reform is always a concern. Structured settlements essentially exist because of two small sections of the tax code: IRC rules 104(a)(2) and 130(c).7
The good news is that the structured settlement industry has routinely been found to be de minimis, which means the tax benefits that the government would gain from changing the tax code to eliminate the protections offered under sections 104(a)(2) and 130(c) are too small to consider eliminating or changing either. There is always the danger that either could get mistakenly included in sweeping tax reforms, but the structured settlement industry, through its trade association (The National Structured Settlements Trade Association, or NSSTA), regularly meets with members of Congress and the U.S. Treasury to make sure they are aware of the structured settlement industry and the people they help. For a small industry, structured settlements enjoy overwhelming bi‑partisan support on Capitol Hill and many legislators understand the protections offered by structured settlements and the millions of constituents who benefit from them.
Despite the many advantages of structured settlements and their resurgence, there is still room to increase the use of a structure in a settlement package.8
While settlement financial planning is a very small part of the overall life cycle of a claim and settlement, claims professionals should consider hiring a structured settlement consultant who can be valuable during the negotiation or mediation process. However, the process of engaging them should start early in the case rather than later in the negotiations.
Bringing all parties to the table early on will result in a more productive dialogue.9 The best part of engaging the services of a settlement consultant is they charge no fees to any party in the negotiation so you can involve one at no cost to the file – a service that would contribute valuable insight and help navigate a claim to the finish line.
Your Gen Re Claims team is always here for our clients. If you have questions regarding any part of the structured settlement process, a broker can help.
Peter Early is President of Ringler Associates – Northern New England. For the past 20 years, he has participated in settlement conferences and mediations, advising clients on structured settlements and other products to meet their needs, and ensuring that every case gets custom attention, so the right solutions are in place following a claim resolution. Before joining Ringler, Peter worked on Capitol Hill and brought that experience to the National Structured Settlements Trade Association Board of Directors, where he was elected by his peers in 2020.
