S-0994.1  _______________________________________________

                         SENATE BILL 5506

          _______________________________________________

State of Washington      57th Legislature     2001 Regular Session

By Senator Jacobsen

Read first time 01/24/2001.  Referred to Committee on Labor, Commerce & Financial Institutions.

Using reinsurance to satisfy the requirements of maintaining a separate reserve fund.

    AN ACT Relating to the separate reserve fund maintained by a charitable gift annuity business; and amending RCW 48.38.020.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

    Sec. 1.  RCW 48.38.020 and 1998 c 284 s 2 are each amended to read as follows:

    (1) Upon granting to such insurer or institution under RCW 48.38.010 a certificate of exemption to conduct a charitable gift annuity business, the insurance commissioner shall require it to establish and maintain a separate reserve fund adequate to meet the future payments under its charitable gift annuity contracts.

    (2) The assets of the separate reserve fund:

    (a) Shall be held legally and physically segregated from the other assets of the certificate of exemption holder;

    (b) Shall be invested in the same manner that persons of reasonable prudence, discretion, and intelligence exercise in the management of a like enterprise, not in regard to speculating but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.  Investments shall be of sufficient value, liquidity, and diversity to assure the insurer or institution's ability to meet its outstanding obligations; and

    (c) Shall not be liable for any debts of the insurer or institution holding a certificate of exemption under this chapter, other than those incurred pursuant to the issuance of charitable gift annuities.

    (3) The amount of the separate reserve fund shall be:

    (a) For contracts issued prior to July 1, 1998, not less than an amount computed in accordance with the standard of valuation based on the 1971 individual annuity mortality table with six percent interest for single premium immediate annuity contracts and four percent interest for all other individual annuity contracts;

    (b) For contracts issued on or after July 1, 1998, in an amount not less than the aggregate reserves calculated according to the standards set forth in RCW 48.74.030 for other annuities with no cash settlement options;

    (c) Plus a surplus of ten percent of the combined amounts under (a) and (b) of this subsection.

    (4) The general assets of the insurer or institution holding a certificate of exemption under this chapter shall be liable for the payment of annuities to the extent that the separate reserve fund is inadequate.

    (5) For any failure on its part to establish and maintain the separate reserve fund, the insurance commissioner shall revoke its certificate of exemption.

(6) A charitable gift annuity business may satisfy the requirements of establishing and maintaining a separate reserve fund by utilizing reinsurance under the same conditions and to the same extent as set forth in RCW 48.12.160, except for the additional requirement that the charitable gift annuity business shall disclose the use of reinsurance in its statement of financial condition, and shall make such disclosure available to its charitable gift annuity contract holders.

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