Pennsylvania Commonwealth Court Judge Bonnie Brigance Leadbetter has signed an Order approving a Transfer and Assumption Agreement whereby Reliance Insurance Company will transfer all Reliance-owned structured settlement annuity contracts and corresponding payment obligations issued by Genworth Life Insurance Companies to a new corporation, the Genworth Annuity Service Corporation.
Reliance was declared insolvent in 2001 and the Pennsylvania Insurance Commissioner was appointed as Liquidator. The Reliance Estate, however, remains open and its current assets, prior to the Transfer Order, included approximately 3,400 structured settlement annuity contracts of which approximately 3093 involve annuity contracts issued by Genworth and owned by Reliance.
Many of these Genworth funded structured settlements involve annuity contracts issued by United Pacific Life Insurance Company, a former Reliance subsidiary which Reliance sold in 1993 and which is now known as Genworth Life Insurance Company.
According to the November 4, 2013 Transfer Application which Judge Leadbetter's Order approved:
- The transferred structured settlements will continue to satisfy the corresponding periodic payment obligations and Reliance will be discharged from its obligation for those future periodic payments.
- Based upon a private letter ruling from the Internal Revenue Service:
- Neither Reliance nor Genworth will incur any adverse tax consequences as a result of the transfer.
- The tax treatment of the periodic payments to the structured settlement recipients will remain unchanged.
- Genworth Annuity Service Corporation will be owed 80 percent by Genworth and 20 percent by Reliance.
In an earlier Transfer Application filed with the Liquidation Court on September 10, 2012, the Reliance Liquidator had requested an Order approving transfer of ownership of all Reliance-owned structured settlement annuity contracts to the annuity payees. In many cases according to that transfer application, these payees included factoring companies and investors who had purchased structured settlement payment rights from factoring companies.
Judge Leadbetter never approved the September 10, 2012 Transfer Application and on February 28, 2013 ordered that Transfer Application “be held in abeyance until further order of this Court.”
The September 10, 2012 Transfer Application noted:
- The Liquidator did not have a complete list of current names and addresses of Reliance structured settlement payees.
- This failure resulted, in part, because Reliance did not retain copies of either the annuity contracts or other structured settlement documents issued by United Pacific Life Insurance Company when it sold the company to Genworth in 1993.
- The Liquidator assumed Reliance structured settlement annuity issuers had the ability to furnish individual notice.
For an earlier S2KM report about Reliance structured settlement annuities, see this blog post.