Relates to admitted assets for annuity risk where a single premium annuity contract has been purchased

BILL NUMBER:S1296

Title of bill

An act to amend the insurance law, in relation to admitted assets for annuity risk where a single premium annuity contract has been purchased

Purpose

To allow charities that issue charitable gift annuities (CGAs) to reduce the amount of required reserves by purchasing an annuity contract from a New York admitted insurer.

Summary of provisions

Amends section 1110(b) of the insurance law to specifically provide that CGA reserves may be reduced with the purchase of a single premium life annuity contract from a life insurance company authorized to do business in New York State.

Justification

This legislation amends the insurance law to allow charities that issue charitable gift annuities to reduce the amount of required reserves by purchasing an annuity contract from a New York admitted insurer. This change would encourage CGA issuers to include commercial annuities among the available tools for risk management. Enabling prudent management of CGA risk benefits New York charities that incur obligations to their donors with CGAs. Encouraging charities to reinsure CGAs with commercial annuities clearly benefits New York consumers, since they not only will hold an obligation from an organization employing robust risk management, they will also be better protected by having not one but two issuers backing their right to payments, both of which are subject to supervision by the New York Department of Financial Services.

While the insurance law assumes that some CGAs will be reinsured, and specifically provides for a deduction for reinsurance in the calculation of required reserves, the statute anticipates reinsurance in the technical sense, with a treaty requirement which effectively makes this insurance alternative unavailable to charities issuing CGAs. Allowing CGA issuers to reduce required reserves by purchasing a commercial annuity will provide additional consumer protection to New York annuitants and enhanced risk management to New York charities. The proposed change will also bring New York into alignment on this issue with the other states that regulate CGAs, and with model legislation adopted by the National Association of Insurance Commissioners (NAIC).

Legislative history

S.3066 of 2013-14; S.7310 of 2011-12

Fiscal implications

None.

Effective date

Immediately.