Relates to admitted assets for annuity risk where a single premium annuity contract has been purchased.
Ayes (59): Adams, Addabbo, Alesi, Avella, Ball, Bonacic, Breslin, Carlucci, DeFrancisco, Diaz, Dilan, Duane, Farley, Flanagan, Fuschillo, Gallivan, Gianaris, Golden, Griffo, Grisanti, Hannon, Hassell-Thomps, Johnson, Kennedy, Klein, Lanza, Larkin, LaValle, Libous, Little, Marcellino, Martins, Maziarz, McDonald, Montgomery, Nozzolio, O'Mara, Oppenheimer, Parker, Peralta, Perkins, Ranzenhofer, Ritchie, Rivera, Robach, Saland, Sampson, Savino, Serrano, Seward, Skelos, Smith, Squadron, Stavisky, Stewart-Cousin, Storobin, Valesky, Young, Zeldin
Excused (3): Espaillat, Huntley, Krueger
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: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 7310 IN SENATE May 2, 2012 ___________Introduced by Sen. SEWARD -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance AN ACT to amend the insurance law, in relation to admitted assets for annuity risk where a single premium annuity contract has been purchased THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subsection (b) of section 1110 of the insurance law, as amended by chapter 419 of the laws of 2001, is amended to read as follows: (b) Every such domestic corporation or association shall maintain admitted assets at least equal to the greater of (i) the sum of its reserves on its outstanding agreements, calculated in accordance with section four thousand two hundred seventeen of this chapter, and a surplus of ten per centum of such reserves, or (ii) the amount of one hundred thousand dollars. In determining such reserves a deduction shall be made for all or any portion of an annuity risk which is reinsured by a life insurance company authorized to do business in this state OR FOR ALL OR ANY PORTION OF AN ANNUITY RISK WHERE SUCH CORPORATION OR ASSOCI- ATION HAS PURCHASED A SINGLE PREMIUM ANNUITY CONTRACT FROM A LIFE INSUR- ANCE COMPANY AUTHORIZED TO DO BUSINESS IN THIS STATE TO FUND SUCH RISK. The required admitted assets shall be invested in accordance with the prudent investor standard as defined in section 11-2.3 of the estates, powers and trusts law and shall not be subject to the investment limita- tions set forth in this chapter. Such assets shall be segregated as separate and distinct funds, independent of all other funds of such corporation or association, and shall not be applied to pay its debts and obligations or for any purpose except the aforesaid annuity bene- fits. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD15567-02-2