Stage 3 – Structured Settlements – Era of Accountability

“We have the Answers”

& Compliance

Claim Management in a Settlement Planning Era

TSSG ReThinkSS Structured Settlements

S3 Business Model

05/02/2011

Copyright © 2011 The Settlement Services Group. All Rights Reserved.

1

Stage 3 – Structured Settlements – Era of Accountability
“We have the Answers”

& Compliance

TSSG ReThinkSS™ Structured Settlements
.

Structured Settlements
for

Defendants & Liability Insurers
.

Problem
Traditional structured settlement business models increase costs and risks for defendants and their liability insurers as a result of strategic industry changes that have occurred since 2001.

Solution
TSSG offers structured settlement solutions (safe harbor through due diligence models) to protect defendants and their liability insurers in an era of accountability and compliance.

Benefits
Improved metrics - reduced loss adjustment expense, increased success ratio, positive public image and industry leadership
S3 Business Model 05/02/2011 Copyright © 2011 The Settlement Services Group. All Rights Reserved. 2

Stage 3 – Structured Settlements – Era of Accountability
“We have the Answers”

& Compliance
Funding & Transaction Diagrams S2P2J

TSSG ReThinkSS™ Structured Settlements
Structured Settlement Financing Alternatives
These diagrams illustrate basic structured settlement transaction (PPR) and funding mechanisms, and have been drawn from the book, (contractual) “Structured Settlement and Periodic Payment Judgments” Claimant (receives PPR) by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert.
Annuity Payments

Qualified Assignment (QAR) with Annuity
Periodic Payment Rights

Financing – (“novation”)

Periodic Payment Rights (PPR)
(contractual)

Annuity Financing – (“buy & hold”)
Release from Tort Liability Defendant/Insurer

Periodic Payment Obligation (PPO)

Defendant/Insurer released from Tort Liability in exchange forcreation of Contract

(receives PPR)

Claimant

creates Periodic Payment Obligation No (PPO) D ire (contractual liability) ity An ct Pa n nu ium y ic Ri Co ym uity An em ol gh nt P e Pr ts ra nts ty ct ui n ua An l Annuity Issuer

Defendan t or its Insurer

(contractual)

Periodic Payment Obligation (PPO) (contractual liability ) Defendant/Insurer Parties Agree to Settlement Amount D efendant/Ins urer trans fersS ettlement Amount to 468 QS B F creates PPO

assume PPO

transfer PPO QS createsPPO F QS trans F fers& fundsPPO

Defendant/Insurer released from Tort Liability in exchange for creation of Contractual Liability
S3 Business Model

05/02/2011

Copyright © 2011 The Settlement Services Group. All Rights Reserved.

Annuity Premium Transfers PPO via QAR Annuity Policy
3

Online Edition Available

Release from Tort (contractual) Defenda Liability Defendant/Insurer creates nt PPO Claimant releases Def/Ins from or its Cla PPO im Qualified Assignment Insurer No via tic an eo ta fd cce (QAR) Op uty pts tio to O ne na ma bli ma wP lS ke go yb ec ay PP Per r e o An uri me iod O ffe nu ty I nt ic red ity nte Pa ym r es to en t in Cla ts im – an Qualified Annuity t Annuity Premium Annuity Assignee Issuer Policy Defendant/Insurer released from Tort Liability in exchange for §130 QAR) (IRC creation of Contractual Liability

Periodic Payment Obligation (PPO)

Interna

Annuity Indemnity R

Assumption Re Qualified A

Non-Qual A

Qualified A Non-Qual A Alternative

Stage 3 – Structured Settlements – Era of Accountability
“We have the Answers”

& Compliance
TSSG – SS History – Tipping pts

History
Stage 1 “Lump-sum”
• Single Hallmark Recovery Rule Functions “Cash & Close” • Exceptions: Work 1965-1975 Comp 1975-1981 Regulatory No-Fault Government OBRA ’80 Social
Benefits Taxation

TSSG ReThinkSS™ Structured Settlements
1982 Stage 2 - Structured Settlement “Claim Management Era” • Periodic Payments • Annuity Financing • Qualified Assignment • Defendant Control • “Gray Market”
1982-1987 1988-1994 1995-2000

2001 Stage 3 - Settlement Planning “Accountability & Compliance Era” • Primary & Secondary Markets • Blended Products • Claimant-Centric Solutions • Competing Business Models 2006-2007 •2001-2005Analysis Risk
Deficit Reduction Act MMSEA enacted

• Full Disclosure • Informed Consent • Re-allocated Responsibilities • Safe Harbors
2008-2009 2010-2011 Health Care Reform HHS-Farmers v Forkey U.S. v Stricker Big R Towing v Benoit 468B Regs (IRS Project)

State Legislation

Medicaid CMS Incl. Omnibus MSP Regs Security Medicare 42 CFR 411.46 Reconciliation Act Budget Act Medicare/ Secondary Medicaid Payer Act Structured Periodic Tax (MSP) TAMRA Settlement Payment Reform Revenue Settlement Act Rulings Act (§130 QAR) CA Model Uniform Supreme Periodic Periodic Court Payment of Payment of approves Judgments Judgments MICRA Act Act Interest Rates Peak 1st Transfer

CMS ‘01 US Issues MSP v. ‘Patel’ policy Baxter memo (1st of 15 Rev Proc Small Bus. Tax Payer Victims of American Job memos) Job 93-34 Relief Act ‘97 Terrorism Tax Creation Act (Re: 468B) Protection (WCRelief Act Act ‘96 §130QAR) (‘911 Fund’) Uniform Prudent Investor Act Revised UCC Article 9 Model State Structured Settlement Protection Act

NAIC Model NY,FL,MA,MN Pennsylvania NAIC Model Rule 229.2 adopt S2 Unfair Trade Compensation Disclosure disclosure rules Protection Act Statement ‘DoddFranks’ Interest rates bottom Ceron v Henderson

Financial Interest Rates/ Credit & Regs Secondary Market

Credit & Liquidity Crisis 1st of 48 state S2 Protection Acts NSSTA adopts Code of Ethics Symetra launches Clearscape NSSTA restricts factoring by Members Symetra resigns NSSTA Fresno County Cases 48 States S2 Protection Acts

Business Standards & Practices Class Action Lawsuits Disclosure LTR 83-3035

Weil v. Manufacturers HIPAA Gramm Leach Biley

ABA Model Rules NAELA adopts Code of Ethics Macomber v. Travelers Grillo case

SSP adopts Std of Prof Conduct

Spencer v. Hartford

Saltzburg & Chemerinsky (’06 paper to AAJ) Joseph v. City of NY ELNY agreement JG AIG bailout Lehman Br Wentw orth bankruptcy bankru ptcy ELNY (possible) Insolvency

Insolvencies Associations

BaldwinUnited NAELA founded NSSTA founded

First Executive/ Monarch Executive Life Capital (CA) NASP founded SSP founded NAMSAP founded

NASP 1st affiliate conference

S3 Business Model

05/02/2011

Copyright © 2011 The Settlement Services Group. All Rights Reserved.

4

Stage 3 – Structured Settlements – Era of Accountability
“We have the Answers”

& Compliance
Re-Thinking SS – Defense Issues

TSSG ReThinkSS™ Structured Settlements

Strategic Issues
for Defendants & Liability Insurers
 When, if ever, should defendants & liability insurers agree to
fund structured settlements?

 What, if anything, should defendants & liability insurers do to
integrate structured settlements with Medicare Secondary Payer compliance?  Do defendants & liability insurers actually save money using structured settlements? If yes, when & how?

 Do alternative business models exist that justify the use of
structured settlements in appropriate cases?

TSSG has the Answers
S3 Business Model 05/02/2011 Copyright © 2011 The Settlement Services Group. All Rights Reserved. 5

Stage 3 – Structured Settlements – Era of Accountability
“We have the Answers”

& Compliance
TSSG – S3 Rising RiskTransitional Analysis – Stage 3 Allocate Duties

TSSG ReThinkSS™ Structured Settlements
Increasing Risks & Costs Stage 3
very different

structured settlement developments and expanding Claimant choices, require a new and

due diligence business model, which re-allocates critical roles and responsibilities.
Claimant Settlement Choices Many Settlement Planning Business Model: Claimant Centric Planning Focused Increasing

Regulation / Public Policy

Low

High

Claim Management Business Model: Defendant Centric Commission Focused Risk / Cost Stage 1 Time
S3 Business Model 05/02/2011

Few Stage 2 1982 Stage 3 2001 2010

Spencer v. Hartford Executive Life of NY MMSEA ’07 – PPACA ’10 Interest Rates Bottom – Annuity Prices Peak

Copyright © 2011 The Settlement Services Group. All Rights Reserved.

6

Stage 3 – Structured Settlements – Era of Accountability
“We have the Answers”

& Compliance
Safe Harbor thru Due Diligence

TSSG ReThinkSS™ Structured Settlements

Safe Harbor
Compliance Metrics

with

TSSG Due Diligence Models

Public Policy Risk & Cost Analysis

(Re)-Allocate Responsibilities

Safe Harbor

Best Interests/ Prudent Investor

Accountability Full Disclosure Informed Consent
S3 Business Model 05/02/2011 Copyright © 2011 The Settlement Services Group. All Rights Reserved. 7

Privacy

Stage 3 – Structured Settlements – Era of Accountability
“We have the Answers”

& Compliance
What we do

TSSG ReThinkSS™ Structured Settlements

Contact TSSG
We help structured settlement stakeholders re-think & re-focus their business models in the
Patrick Hindert Managing Director p: 513-899-2100 pjhindert@tssg.net

Era of Accountability & Compliance

Timothy Morbach Director of Sales p: 734-335-7452 ttmorbach@tssg.net

Co-author “Structured Settlements and Periodic Payment Judgments” Former President of the National Structured Settlement Trade Association Former Executive Director of the Society of Settlement Planners

Recognized leader with 29 years of experience in the Structured Settlement industry Former Vice President of Investments and Structured Settlement Consultant for UBS Financial Services Inc.

Safe Harbor

S3 Business Model

05/02/2011

Copyright © 2011 The Settlement Services Group. All Rights Reserved.

8