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CA Department of Insurance

Grants and Annuities Society

Any nonprofit charitable, religious, benevolent or educational organization, or a nonprofit corporation organized and controlled by a California licensed general hospital, or an incorporated educational institution offering courses of instruction above high school level, or any person or organization maintaining homes for the aged for pecuniary profit (assuming that any or all of the foregoing otherwise qualify under California Insurance Code Sections 11520 - 11524) which desires a certificate of authority from the Insurance Commissioner authorizing it to receive transfers of property conditioned upon its agreement to pay an annuity may apply for such certificate of authority by following these instructions, filing the papers designated, providing the information requested and paying the statutory fee.
  • Original License Application under Insurance Code Section 11520-11524: Any nonprofit corporation that has been in business for at least 10 years can apply for a license (Certificate of Authority) in California to issue charitable gift annuities to individuals in exchange for the transfers of property to the charity. The qualifications for licensure are listed in Insurance Code Section 11520.6.

  • Amended License Application under Insurance Code Section 11520.5: After receiving a license to issue Charitable Gift Annuities in California, the licensee may apply to amend its license if it has undergone a name change.

Application and Amended Application to Issue Charitable Gift Annuities may now be accepted electronically and are supported by California Department of Insurance's Online Assistance System for Insurer Submittals (OASIS).

Please note that if you are submitting by mail, you must file two (2) copies of all the documents listed below and mail to the San Francisco office:

Corporate Affairs Bureau
Department of Insurance
45 Fremont Street, 24th Floor
San Francisco, CA 94105

One copy will be sent to the financial analyst in Los Angeles assigned to your file, while the other copy will be kept in San Francisco for the legal analysts and investigators assigned to your file.

Note:  All required original signatures should be dated no more than one year prior to the filing date of the application.

Your filing for a Certificate of Authority as a Grants and Annuities Society should include the following:


LEGAL DOCUMENTS

  1. An application fully and accurately completed, duly executed and verified by an executive officer of the applicant.

  2. Please see the "Certificate of Authority" fee category on the Schedule of Fees and Charges. Make your check payable to the order of the Insurance Commissioner of the State of California.

  3. A certified copy of applicant's articles of incorporation or other organizational documents (original plus all amendments) which must specifically authorize the applicant to conduct a grants and annuities business, or in the alternative, provide general language designating broad powers to solicit and receive contributions and donations, sufficient to encompass a grants and annuities business.

    Articles of Incorporation should bear the original true copy certificate of the official filing officer, such as the Secretary of State, in applicant's domiciliary state.

  4. The applicant's bylaws certified by the organization's secretary over its corporate seal to be a true copy of the bylaws currently in force.

  5. A copy of the resolution of applicant's governing body whereby it has resolved to engage in the business of contracting to pay annuities in return for transfers of property or money received. The resolution should authorize the applicant's officers to sign the application for a certificate of authority and to do other things necessary to act as a grants and annuities society. The resolution must be certified as a true copy by the organization's secretary.

    Applicant may use the Department's sample Board Resolution at its option.

  6. If applicant is a foreign (out-of-state) organization, it must submit the form entitled "Appointment of Agent for Service of Process and Stipulation." Appointment of an individual with a California address (not a Post Office Box Number), preferably with an established place of business, who can be readily located and served with notices, legal process and papers is mandatory. Date of agent's acceptance must be on or after the appointment/execution date.

  7. Submit with the application a copy of all proposed advertising and solicitation materials, along with a Declaration of an officer containing commitments concerning warnings to be included in all advertising.


FINANCIAL DOCUMENTS


The California Insurance Code does not specify a minimum amount for Grants and Annuities Societies.  However, California Insurance Code Section 11520.6 mandates that the Department make the following determination:

  • Before granting a certificate of authority or amended certificate of authority as a grants and annuities society to any applicant, the commissioner shall consider the qualifications of the applicant with respect to the following subjects:
  1. Minimum net worth and working capital.
  2. Lawfulness and quality of investments.
  3. Financial stability.
  4. Reinsurance agreements.
  5. Competency, character, and integrity of management.
  6. Ownership and control.
  7. Fairness and honesty of methods of doing business.
  8. Risk to the public.
  • Upon consideration of all relevant qualifications, the commissioner shall issue a certificate of authority to an applicant, unless the commissioner finds that the applicant is materially deficient with respect to one or more of the subjects.

It is therefore essential to admission for applicant to establish that it has enough assets so that its conduct of this business will not be hazardous.  Grants and Annuities Societies are subject to the insurance insolvency laws of this State.  If applicant appears to lack sufficient assets to be able to withstand the strain of any unusually long-lived annuitant in its early annuity business experience, a Certificate of Authority will not be granted.

We further caution that accurate and sufficient financial statements must be filed every year and that in the absence thereof this Department has the authority to send an examiner to examine that applicant at applicant's expense.  Therefore, applicant should not apply for such a certificate of authority unless it has a reasonable expectation of transacting more than just a few annuity agreements; applicant also should not apply unless it is able to spend the necessary time and money attending properly to such business, including the filing of acceptable annual financial statements.

  1. Accurate and complete financial statements, audited if available, consisting of a balance sheet and income and expense statement showing the current condition of applicant's affairs.  Applicant should supply such financial statements for the last three years, and any more recent quarterly statements if available.

    NOTE:  Applicant should be prepared to update with quarterly financials, and with annual statements if such should become available during the course of the Application review process.

  2. If applicant is an out of state entity already transacting a grants and annuities business in California, an accurate and current financial statement showing the condition of applicant's grants and annuities operations. This Financial Statement for Grants and Annuities Operations should be prepared for the last three years.  A copy of the financial statement and instructions is found at Grants & Annuities - Notices and Forms.

    Said statements should be sworn to by the officer having the responsibility to prepare them.

    If and when applicant receives a certificate of authority, applicant will be required to provide information annually on the reserves segregated on behalf of Applicant's California annuity agreements only.  This same Annual Statement form will be used for that purpose. It may also be found at Grants & Annuities - Notices and Forms.

  3. The Financial Questionnaire must be fully completed, signed and sworn to by an executive officer of applicant who personally knows the facts.


RATES AND FORMS

  1. Two copies each of all forms of annuity agreements to be used must be furnished with the application.  See Section 11523 regarding content of such agreements.

    Please note that this filing requirement includes each permutation of the proposed form, such as one donor, present; one donor, deferred; two donor present; two donor, deferred; etc.  These forms will be kept in your 'permanent file' with the Department, and should your forms change in the future, you will be required to so notify the Department and supply the new forms.

  2. A Declaration of an officer affirming that no annuity agreements have been written to date in the state of California, and that no such agreements will be written in California unless and until Applicant receives its Certificate of Authority.

    NOTE: If applicant officer is unable to make such a declaration, due to  annuity agreements having been issued prior to the filing of the application in California, see below.

  3. The schedule or table of rates applicant will use in determining  the amount of annuity to be paid, or the basis applicant will use to determine the amount of annuity.  Please bear in mind that if deferred annuities will be offered, a separate table of rates which includes the annuitant's interest will be required.

    If applicant is planning to use the standard rates promulgated by the American Council on Gift Annuities, ("ACGA") a declaration from an officer so indicating will suffice.

    However, please note that when the ACGA rates change, the Department will be making the assumption that  your rates will be changing with the ACGA rates change.  If you wish to keep your previous rates and not change with the AGCA you will need to inform the Department in writing at:

    California Department of Insurance
    300 South Spring Street, South Tower, 13th Floor
    Los Angeles, CA 90013
    Attn: Financial Analysis Division Office (Grants & Annuities)

    In that case, you should also inform donors that you are not adopting the lower ACGA rates at this time.

    In all cases, your rates must be uniform.  For further information concerning rates, please refer to Grants & Annuities - Notices and Forms.


SPECIAL NOTE REGARDING "PRE-ISSUED" CALIFORNIA ANNUITY AGREEMENTS


If Applicant has already written annuity agreements in California, in addition to the above documents concerning post-licensing agreement forms, submit the following:

  1. A Declaration of an officer affirming the number of annuity agreements previously written in California, along with a commitment that no further such agreements will be written in California unless and until Applicant receives its Certificate of Authority.

  2. Two copies of each such annuity agreement previously written in California, along with the filing fee.

    Filing fees depend upon the number of agreements for which information is filed within any calendar quarter:
    1. for the first 10 agreements for which information is being filed: basic fee of $60.00 for each agreement included, pursuant to Section 2202(a)(13) of Title 10 of the California Code of Regulations.

    2. for 11 to 20 agreements: 50 percent of the basic fee;

    3. for 21 to 30 agreements: 20 percent of the basic fee;

    4. for 31 to 40 agreements: 10 percent of the basic fee and

    5. for 41 or more agreements: 5 percent of the basic fee.

  3. A Declaration of an officer that the annuity agreements previously written in California are  in compliance with the mandate of Cal. Ins. Code Sec. 11523 as to required provisions, or in the alternative, a Declaration that each such agreement will be amended to comply with such required provisions.

  4. A completed Financial Statement for Grants and Annuities Operations for the previously written agreements, as of the last three years.


DOCUMENTS CONCERNING SEGREGATED ANUITY RESERVE FUND


NOTE: The reserve required by the table of commensurate values for each annuity contract issued must be invested in acceptable securities having a sufficient degree of liquidity.  Government bonds and other securities described in Insurance Code Sections 1170-1182 are acceptable.  See Insurance Code Section 11521.2(a).

  1. If applicant will make its own investment decisions and it will hold its own reserve fund, please submit the Declaration of Trust executed in original over corporate seal, which provides that the applicant will invest the funds or property held in trust in accordance with the requirements of the California Insurance Code.  Additionally, note that the document includes a provision that all investments will be held in the name of the grants and annuities society.

    In addition, if Applicant uses the above Declaration of Trust, and plans  to holds its reserve funds in a custodial account with a financial institution, that custodial account must adhere to the guidelines applicable to insurance company custodial accounts.

  2. If a financial institution will hold the securities, an acceptable Trust Agreement must be executed with that institution which will act as Trustee and the Agreement submitted to the Department.  The Trust Agreement should adhere to certain guidelines with respect to Grants and Annuities Societies Trust Agreements. Trust agreement guidelines for outside financial institutions:
    1. No bankers' liens: Bank may not charge fund for its fees; Bank must bill (Foundation) Trustor separately.

    2. Trust must be a separate account physically and legally segregated from the other assets of the Trustor.

    3. Distribution of excess amounts in fund: per request in writing signed by an officer of the Trustor, containing the officer's certification that the Board of Directors of the Trustor (i) authorized such a withdrawal, and (ii) determined that such a withdrawal will consist of amounts that are over and above the reserve required to be maintained under the provisions of the California Insurance Code then in effect.

    4. Trustee acts as investment adviser to the Trustor with respect to the assets of the trust, but Trustee makes investment changes in the trust only with the prior approval of the Trustor.

    5. All investment of the assets of the trust solely in investments complying with the provisions of the California Insurance Code Sections 11521.2 and 1170 through 1182.

    6. Trustee is responsible for physical loss of or damage to the securities under its care, custody, and control or under the care, custody, possession, and control of its nominees, depositories, Federal Reserve Banks, and agents. In the event of loss of or damage to such securities, Trustee shall, upon demand by the Trustor, promptly replace such securities with like kind and quality together with all rights and privileges pertaining to such securities, or if acceptable to the Trustor, deliver cash equal to the then fair market value of the securities.

    7. All records of the trust available for inspection by the Trustor, the Trustor's auditors, the California Insurance Commissioner or his designee, and any other person duly authorized by the Trustor; plus written verification of securities on request.

    8. Trustor may revoke at any time; prior written consent of Department of Insurance required.

    9. No amendment without prior written consent of Department of Insurance.

    10. Agreement is not assignable; if Bank resigns as Trustee (30 days written notice) it may appoint a successor with prior written consent of California Department of Insurance.

    11. Proxies to be forwarded to the Trustor.

    12. California law governs. (If Bank is in California.)
    If the applicant elects to go this route (assets held under trust agreement with financial institution, rather than custody agreement), it may be permissible to hold the investments in the name of the trustee's nominee.  In such case, applicant must submit an affidavit over the signature of trustee's officer regarding the make-up of the nominee, including its legal structure of officers, directors or partners, as appropriate.  In the alternative to such an affidavit, the nominee's make-up may be specified in the contract.  The nominee of a trustee is often a partnership made up of the employees, officers or directors of the trustee or those of a financially affiliated corporation.  If such is the case, generally no objections will be found.  Also, applicant must disclose the name of the nominee of any depository to be used.  To date, the Department has approved nominees utilized by the three acceptable depositories; i.e., the nominee used by the Depository Trust Company in New York, Midwest Trust Company in Chicago, and the Philadelphia Trust Company in Philadelphia, and Participants Trust Company (New York).

    Registration of definitive securities may only be in the nominee name of the trustee or that of an approved depository; there may not be any language authorizing re-registration in the name of any agent of the trustee.  If the trustee will not use any nominee other than that of the approved depositories, please so specify in the contract or in the above-referenced affidavit.

    If cash will not be held under the Trust Agreement, the applicant must submit with the application proof that a trust account has been established in a bank which, in the case of a California-domiciled society, must be physically located in California.  The proof must consist of a copy of the authorization card which specifically shows that the account has been labeled as a trustee account; such copies must be certified by an officer of the bank in which the trust account has been opened.  Likewise, if applicant will hold its own securities in trust, a trust account for holding cash must be opened.  See Insurance Code Section 11521.1.

    If applicant will do its own investing, we require detailed information regarding the investment experience and level of sophistication regarding investments of all individuals within the grants and annuities society functioning in an investment capacity.

    If applicant will utilize an outside investment advisor (whether the financial institution is holding the investments or otherwise), please provide a narrative description of the investment experience of that entity.  If applicant uses an outside advisor when it is holding its own assets or uses an investment advisor other than the trustee, a separate investment advisory agreement must be submitted.

    Sample trust agreements:
    Gift Annuity Funds Trust
    Trust Agreement


INVESTIGATIONS DOCUMENTS

  1. Accurately completed biographical affidavits on the Department's prescribed forms for Individual Affidavits.

    As part of the application process, it will be necessary for the Applicant to ensure completion of both the Organizational Affidavit and the Individual Affidavit(s).

    The Organizational Affidavit must be completed by an executive officer of the applicant organization.

    The Individual Affidavit must be completed by all of the following individuals:
    1. Applicant's Officers;

    2. Directors of Applicant who manage or have decision making authority over day-to-day charitable giving programs;

    3. Directors of Applicant who manage or who have access to the charitable gift annuity reserves;

    4. Directors of applicant who make investment decisions for the reserve fund;

    5. Staff or employees of Applicant who manage or have decision making authority over day-to-day charitable giving programs;

    6. Staff or employees of Applicant who manage or who have access to the charitable gift annuity reserves;

    7. Staff or employees of applicant who make investment decisions for the reserve fund;

    The responses to the affidavits must be typed or printed and all questions must be answered. Do not leave a space blank. If additional space is required, attach an addendum numbering the response to the corresponding question. Send the original and two (2) copies if submitting by mail.

  2. The Individual Affidavits (or "Bio's") should be accompanied by a Declaration of an officer with authority and knowledge of the matter to attest that the Individual Affidavits of the pertinent individuals have been provided.

    As described in that Declaration the Individual Affidavits must be provided for the following persons:
    1. All the officers of Applicant;

    2. All directors (or trustees) and any staff or employee managing the day-to-day grants and annuities activities of applicant, including solicitation activities;

    3. All directors (or trustees) and any staff or employee managing the reserve fund;

    4. All directors (or trustees) and any staff or employee having access to the reserve fund;

    5. All directors (or trustees) and any staff or employee making investment decisions;

    6. investment committee or investment management persons.
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