Over the past two years, a committee of the NAIC (known as the Annuities Working Group) has worked on a model regulatory act for charitable gift annuities. During that time this committee, chaired by Jerry Fickes of the New Mexico Insurance Department, was kind enough to allow Frank Minton and Clint Schroeder, on behalf of the American Council on Gift Annuities, to submit comments on successive drafts of the act. Frank and Clint sought to make the model regulatory act as palatable as possible to the charitable community, and they also urged the committee to adopt and circulate a model exemption statute along with the model regulatory act. The committee incorporated some of their suggestions in the model regulatory act, but declined to consider an exemption statute because they asserted that their charge was only with the responsibility of producing a model regulatory act.
In March of this year the committee approved a final draft of the regulatory act, and then referred it to the NAIC "A Committee," which is chaired by Therese Vaughan, Insurance Commissioner of the State of Iowa. The "A Committee" also approved the draft, and it is now scheduled for consideration by the Executive Committee of the NAIC on June 22 and then at the plenary session of the state insurance commissioners on June 23. These meetings will be held in Boston.
It is imperative that we act immediately to persuade the Executive Committee to take two actions:
1. Adopt a model exemption act similar to the draft provided first to the Annuities Working Group and then to Therese Vaughan.
If the NAIC circulates only a model regulatory act, some of the twenty states that already exempt gift annuities from most regulations may adopt this new model act. Likewise, many of the states currently silent on the subject of gift annuities may adopt it as well. then charities would have to operate in a more regulated environment, and operating a gift annuity program could become prohibitively expensive.
2. Amend two provisions of the model regulatory act.
First, the act should set forth a uniform way for calculating required reserves rather than letting the reserve valuation method be determined by each state. Having to produce multiple actuary reports is both confusing and expensive for charities.
Second, the act should allow charities to invest gift annuity reserves in accordance with a prudent investor standard rather than be subject to the investment restrictions applicable to domestic insurers. If charities have to adhere to these restrictive investment rules (such as New York and California now impose on charities) equity investments will be severely limited, and charities will be unable to choose a portfolio to maximize total return.
If the Executive Committee is not prepared to take these actions, then they should be asked to refer the matter back to the "A Committee" and defer any action pending further review of the matter. Persuading them to defer action may, in fact be our most promising strategy.
We have just over two weeks to succeed with our objectives. We must communicate directly with the five members of the executive committee, who will vote on the issue June 22. These are:
Iowa
Therese M. Vaughan, Commissioner
Iowa Insurance Division
Lucas State Office Building, 6th Floor
Des Moines, IA 50319
Phone: (515) 281-5523 Fax: (515) 281- 3059
North Carolina
Jim Long, Commissioner
North Carolina Insurance Department
430 N. Salisbury Street
P.O. Box 26387
Raleigh, NC 2761
Phone: (919) 733-7149 Fax: (919) 733-6495
Kentucky
George Nichols, Commissioner
Kentucky Insurance Department
215 W. Main
Frankfort, KY 40602
Phone: (502) 564-3630 Fax: (502) 564-6090
Connecticut
George M. Reider Jr, Commissioner
Connecticut Insurance Department
P.O. Box 816
Hartford, CT 06142-0816
Phone: (860) 297-3802 Fax: (860) 566-7410
North Dakota
Glenn Pomeroy, Commissioner
North Dakota Insurance Department
State Capitol, 5th floor
600 E. Boulevard Avenue
Bismarck, ND 58505-0320
Phone: (710) 328-2440 Fax: (710) 328-4880
We must use letters, faxes, e-mails, and the telephone to communicate with these five members of the Executive Committee. We must also ask charities located in the five relevant states to see out individuals who have influence with the insurance commissioners and to have those individuals personally contact the commissioner in their states.
In addition to sending letters to the five members of the Executive Committee, you should urge charities to send letters to the state insurance commissioners in general, especially to the commissioner from their state. Draft letters to the Executive Committee and to commissioners in general are attached. I am also enclosing a copy of the Model Exemption/Notice Act prepared by the American Council on Gift Annuities.
Please act quickly, and please advise me of all your correspondence, e-mails, etc. Furthermore, please let me know the results of your contacts. You can reach me by e-mail at simmonst@tklaw.com; telephone 214-969-1419; fax 214-969-1751.
Please move now. Otherwise, by the time of the summer solstice, we may be toast.
