New York 50A and 50B Case Resolution

New York 50A and 50B Discount Rate Update

If there is a discernable trend in the current 10-Year Treasury rates/yields, it is upward. The latest auctions, the interim March auction and the regular February carry the same stated rate, but almost a 25 basis point difference in yields. They are

• •The March 16, 2009 issue date has a stated rate of 2.75%, and a yield of 3.043% or the government will receive $97.50 for every $100 bond value.
• •The February 17, 2009 issue date has a stated rate of 2.75%, and a yield of 2.818% or the government received $99.41 for every $100 bond value.

That means that the purchasing market wants and will get a higher yield for their investment.

Whatever the interim movement, we believe that yields will hold well below the breakeven discount rate of 3.625% for some time, or until either inflation floods into the market or better yielding, safe investments are offered to those with money. The government is attempting to free up consumer and business credit, and resolve the mortgage mess. That would seem to dictate low rates on debt instruments.

We believe that, in the short term, the valuation of future damages will be higher than the cost of annuities to make the projected periodic payments. And, just when the annuity providers adjust the cost to move closer to the valuation, inflation will push in to produce a marked rise in 10-Year yields , and produce valuations that are well below the cost of annuities to make the projected periodic payments.

During this period of low yields, the overall return (total payments divided by net element valuation or cost) falls to a marginal return point for shorter term future loss elements. The plaintiff is surrendering control and flexibility for a questionable tax benefit, after dealing with insurer reluctance to resolve matters in the wake of their earlier investment decisions.

For these reasons, we believe that plaintiffs should take an aggressive approach to settlement by offering a valuation based on some average that is above a breakeven discount rate, select which elements of shorter term loss to take as cash, and invest the proceeds together with a selected portion of past Pain and Suffering and lump sums through a trust. That would leave longer term elements resolved through annuities.

By selecting some average, the defense gains from a valuation that is less than one dictated by low 10-Year Treasury yields. The plaintiff gains more timely settlement, while minimizing insurer risk and placing proceeds through vehicles that can, to some extent, adjust to inflation.

To see our current average rates and yields together with examples of valuations, reconciliations and payments schedules, please go to the demo locations and follow the instructions.

50A Demos 50B Demo

For a fuller discussion of rates, breakeven and strategic approaches to settlement

Articles on New York Case Resolution

For a subject by subject discussion of the applicable statutes

Operation of New York 50A Operation of New York 50B

The Burbank Group Tel. #: 908-955-4661