The issuing life insurance company guarantees annuities. Only those highly rated by the rating agencies (Moody’s, A.M. Best, Standard & Poor’s) are selected for structured settlement annuities.

In California, companies offering structured settlements must first be approved by the California Department of Insurance. The department evaluates the insurance carrier’s solvency and whether the carrier complies with California regulations. Carriers are also subject to mandatory annual audits and other financial compliance requirements. By regulation, all annuity reserves must have assets that are equal to or exceed the corresponding payment obligations. In addition, the assets supporting these reserves may not be removed from the insurance company. Reserve sufficiency is mandatory and is frequently monitored by state legislators and auditors.

State insurance commissioners have developed these regulations to preserve the solvency of general accounts that hold assets, ensuring that contractual obligations to policyholders are met. These general accounts support only the obligations of the insurance companies–and not the obligations of a parent company or other subsidiaries.