Law Times

Law Times • march 30, 2009 McKellar Structured Settlements Inc., Canada's first such company in operation since 1979, agrees the economic downturn has spooked some potential clients wondering about the stability of their investments. However, as his company's tag line — "bil- lions of dollars invested and not a penny lost" — suggests, the pay- ment history of insurance com- panies in Canada is as close to an ironclad guarantee as one can get. "The only better security that n a world of economic un- certainty with investors scrambling to shore up their nest eggs, the track record of structured settlements with in- surance companies in Canada is unimpeachable, say those who design the arrangements. Frank McKellar, president of Creating certainty through structured settlements I BRIEF: STRUCTURED SETTLEMENTS BY KELLY HARRIS Law Times available for people receiving com- pensatory damages for personal injury or death. They work much the same as a guaranteed tax-free annuities or pensions. The agree- ments were created by the federal government, to act as an incentive for people to invest compensatory els of protection, Mitchell says structured settlements would or 85 per cent of the payment, whichever is greater. Thirdly, the owner of the contract covers whatever is not made up in the first two levels of guarantee. Because of the different lev- obligations to their policyholders. Only at time of settlement can clients arrange a structure agree- ment. Today's arrangements are showing a rate of tax-free return in the five-per-cent range. Con- sidering structures are tax free, in order to match their growth, I can't think of anything more secure than a structured settlement, but I think I get more questions these days than I used to. I think some people are coming towards them because of the economic situation and some other people are being more resistant because of the economic situation. damages. By investing in a struc- tured settlement, people who may be unable to work and gain an in- come due to an injury will be pro- vided with a guaranteed income. Structured settlements carry you would have in Canada would be a covenant from the federal government," McKellar says. "You've got to look at the federally registered life insurers in Canada, and going back to Confederation, there hasn't been a penny failed to be paid to annuities in Canada." McKellar notes during the three levels of guarantee, the first being the assets of the company holding the money. If payments cannot be made, the second protection Assuris, simi- lar to the Canadian Deposit Insurance Corp., covers $2,000 fice of the Superintendent of Fi- nancial Institutions is to make sure insurance companies op- erating in Canada have enough capital and surplus to satisfy their stand even if the entire economy had fallen apart. "If there was such a catastrophe that Sun Life couldn't pay their annuity pay- ments then everything else in the Canadian economy would have gone to dust first." One of the roles of the Of- the rate of return on other, tax- able, investments would need a rate of return in the seven- to nine-per-cent range. Henderson managing partner Bob Nigol says the volatility of the market has led to growth in the in- dustry. He recalls one couple with an irrevocable plan complaining last summer that they made a mistake and wanted to pull their money out, which Nigol informed them they could not. PAGE 13 you," he says. "This one particu- lar couple believed they should not have placed (their settlement) in a structured financing plan. "They have called thanking me . . . for effectively insisting that they had to stay in a structure." Kyla Baxter, from Baxter Struc- "We have had many a thank tures, says she often hears from clients thanking her for setting up the structure and the horror stories of people who opted to invest on their own. "Clients call to re-confirm the safety and the guarantees in place in the structured settlements and leave knowing their investment is in place and going to provide for their future needs as opposed to the risk of the volatile outside market," says Baxter. "We have a client who calls regularly to say how happy he is that he chose the structure and can't imagine the position he would be in now if he hadn't with the markets as volatile as they are. "He says it gives him peace of mind knowing that he will be okay, one less thing to worry about." LT Great Depression, while even the provincial government in Alberta was defaulting on bonds and cutting their rates in half, life insurance companies con- tinued to make payments. As a result the large insurance com- panies in Canada carried on and even grew in size, he says. "You go back to the Depres- sion which is the nearest eco- nomic climate in North Amer- ica to what we are experiencing now, the nearest I'm not saying this is as bad, it certainly isn't," McKellar says. "If you go back to the Depression you've got that unblemished record of those federal life insurers paying every penny through the Depression." McKellar is on the verge of celebrating its 30-year anniver- sary and has offices all over Can- ada. In Ontario there are three other companies arranging struc- tured settlements, Baxter Struc- tures, Henderson Structured Settlements Inc., and Structured Settlements Group Inc. Questions about the stability of structured settlements are being heard at other companies prepar- ing the arrangements. Douglas Mitchell, president of SSG Inc. in Toronto, notes those receiving the large-scale insurance payouts nec- essary to build a structured settle- ment have concerns and are not in a position to take chances on investing on their own. The stabil- ity of the arrangements has meant a potential for more people to opt for them in uncertain times. "People are tending towards them more, but at the same time people are asking more about the security and asking more about that," says Mitchell. "I can't think of anything more secure than a structured settlement, but I think I get more questions these days than I used to. I think some people are coming towards them because of the economic situation and some other people are being more resistant because of the economic situation." Structured settlements are Untitled-8 1 www.lawtimesnews.com 3/24/09 11:54:37 AM With The McKellar Structured Settlement™ The McKellar Structured Settlement is a sure thing. Tax-free. Guaranteed. Billions of dollars invested, not a penny lost. www.mckellar.com 1-800-265-8381

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