History & Origins of the SIS
From thalidomide-era structured settlements to a modern capital-gains tool.
The SIS is the grandchild of the structured settlement. Decades ago, courts and Congress wanted seriously injured accident victims to receive steady, guaranteed payments instead of lump sums they might exhaust. A 1982 federal law made those periodic payments tax-favored and let insurers take over the payment duty. Beginning in the early 2000s, the same machinery was adapted so sellers of real estate and businesses could spread their capital-gains tax over time.
Structured-settlement roots
The structured settlement was born from tragedy. In the 1960s, the morning-sickness drug thalidomide caused severe birth defects in thousands of children. Courts recognized that a single lump-sum award was poorly suited to lifelong needs — lump sums are spent, mismanaged, or lost. Periodic-payment settlements, funded by annuities, emerged as the solution, pushing against the common-law single-recovery rule traceable to Fetter v. Beale (1699).
The legal foundations
Two pieces of 1980s federal law made structured settlements work — and still underpin the SIS today: they let periodic payments be tax-favored, and let an insurer take over the payment duty.
- IRC §104(a)(2) excludes from gross income damages received on account of personal physical injury — including the future investment earnings embedded in periodic payments, provided the claimant never has constructive receipt of the funding asset.
- Rev. Rul. 79-220 (1979) confirmed that a claimant electing periodic payments is taxed only as payments are received.
- The Periodic Payment Settlement Act of 1982 (P.L. 97-473), signed by President Reagan, codified the tax treatment and added IRC §130, permitting a qualified assignment that lets a defendant or insurer transfer the periodic-payment obligation to a specialized assignment company.
The industry organized around this framework: the NSSTA was founded in 1985, and by 2024 the structured-settlement market reached a record $9.48 billion in new annuity premium, backed by an industry holding well over $100 billion in reserves.
From settlements to sales: the non-qualified bridge
One obstacle blocked using this machinery for ordinary asset sales: IRC §130's qualified assignment requires the underlying claim to arise from physical injury. A real-estate or business sale has none. The solution was the non-qualified assignment — the same obligation-transfer mechanism, executed through an assignment company that does not rely on §130 and is structured so it is not itself a life-insurance company for purposes of IRC §453B(e). The gain is then governed entirely by the ordinary installment-sale rules of IRC §453.
Evolution of the modern SIS
Allstate Life is widely credited with pioneering the structured-sale product in the early 2000s. The 2008–2009 financial crisis and the low-rate era cooled the market, and Allstate exited around 2013. The strategy revived for two reasons: the Tax Cuts and Jobs Act of 2017 eliminated §1031 like-kind exchanges for personal property and businesses — increasing demand for alternatives — and new carriers entered. Independent Life launched its program around 2018, and MetLife (through Metropolitan Tower Life) re-energized the market in 2019. Today the principal carriers are MetLife / Metropolitan Tower Life (minimum case size around $500,000, terms up to 40 years, all 50 states as of July 2025) and Independent Life (whose iStructure indexed annuity links growth to the Franklin BofA World Index).