11520. The following organizations and persons may receive
transfers of property, conditioned upon their agreement to pay an
annuity to the transferor or the transferor's nominee, after
obtaining from the commissioner a certificate of authority so to do:
(a) Any charitable, religious, benevolent or educational
organization, pecuniary profit not being its object or purpose, after
being in active operation for at least 10 years; provided,
nevertheless, that 10 years of active operation shall not be required
in case of:
(1) A nonprofit corporation organized and controlled by a hospital
licensed by the State Department of Health Services as a general
acute care hospital pursuant to Chapter 2 (commencing with Section
1250) of Division 2 of the Health and Safety Code; and
(2) An incorporated educational institution offering courses of
instruction beyond high school, organized pursuant to Section 94757
of the Education Code, and which is, and for at least one year has
been, qualified pursuant to Chapter 7 (commencing with Section 94700)
of Part 59 of the Education Code to issue diplomas or degrees as
defined in Sections 94724 and 94726 of that code;
(b) Every organization or person maintaining homes for the aged
for pecuniary profit.
This section applies to organizations subject to and operating
under Chapter 10 (commencing with Section 1770) of Division 2 of the
Health and Safety Code.
(c) This section shall become operative on January 1, 1997.
11520.5. No person shall transact in this state the business
described in this chapter without first procuring a certificate of
authority from the commissioner for such purpose. Application for
such certificate shall be made on a form prescribed by the
commissioner accompanied by a filing fee of one thousand seven
hundred seventy dollars ($1,770). Such certificate shall not be
granted until the applicant conforms to the requirements of this
chapter and the laws of this state prerequisite to its issue. After
such issue the holder shall continue to comply with the requirements
of this chapter and the laws of this state. Where a hearing is held
under this section the proceedings shall be conducted in accordance
with Chapter 5 (commencing with Section 11500) of Part 1, Division 3,
Title 2 of the Government Code, and the commissioner shall have all
of the powers granted therein.
Subject to the annual fee provisions herein, every certificate of
authority issued or held under this chapter shall be for an
indefinite term and, unless sooner revoked by the commissioner, shall
terminate upon occurrence of any of the following:
(a) Upon the holder's ceasing to exist as a separate entity.
(b) Upon the winding up or dissolution, or expiration or
forfeiture of the corporate existence of a corporate holder thereof.
(c) Upon winding up or dissolution of a holder not a corporation.
(d) In any event upon surrender by the holder of its certificate
of authority and cancellation of the same by the commissioner.
The commissioner shall not cancel a surrendered certificate of
authority until he is satisfied by examination, or otherwise, that
the former holder has discharged its annuity liabilities to residents
of this state or satisfactorily reinsured the same.
Notwithstanding the preceding provisions for a certificate of
authority of indefinite term, each holder of a certificate of
authority under this chapter shall owe and pay in advance to the
commissioner in lawful money of the United States an annual fee of
fifty-eight dollars ($58) on account of such certificate of authority
until its final termination or revocation. Such fee shall be for
annual periods commencing on July 1st of each year and ending on June
30th of each year and shall be due on each March 1st and shall be
delinquent on and after each April 1st.
Each holder of a certificate of authority shall also be subject to
the payment in advance of the following fees, as appropriate:
(1) One hundred eighteen dollars ($118) for each amended
certificate of authority caused by a change of the name of the
holder.
(2) Eighty-nine dollars ($89) for the services and expenses of
the commissioner in connection with the filing of amended articles by
a holder.
(3) Three hundred fifty-four dollars ($354) for all services and
expenses of the commissioner in connection with the withdrawal of a
holder of a certificate of authority under this chapter.
11520.6. (a) 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.
(b) 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 set forth in
subdivision (a).
11521. Upon granting to such organization or person a certificate
of authority to receive such transfers, the commissioner shall
require it to establish and maintain a reserve fund adequate to meet
the future payments under its outstanding annuity contracts and in
any event not less than an amount computed as follows:
(a) In the case of annuities payable under agreements made prior
to January 1, 1950, in accordance with the standard of valuation
based upon McClintock's table of mortality among annuitants, with
interest assumption at 3 1/2 percent per annum.
(b) In the case of annuities payable under agreements made on and
after January 1, 1950, in accordance with the standard of valuation
based upon the 1937 Standard Annuity Table, with interest assumption
at 2 1/2 percent per annum, or other table of mortality derived from
recent annuity experience, with interest assumption not higher than
is currently yielded on safe securities, as may be prescribed by the
commissioner.
For any failure on its part to establish and maintain such reserve
fund, the commissioner shall revoke its certificate of authority.
11521.1. (a) The funds and other property, together with interest
and dividends thereon and proceeds therefrom, conditioned upon
issuance of the certificate holder's contracts to pay annuities,
shall be maintained under a separate trust agreement for reserves
held for the benefit of California annuitants and shall be held
legally and physically segregated from the other assets of the
certificate holder. The amendments to this subdivision enacted during
the 1993 portion of the 1993-94 Regular Session shall apply to any
organization that is issued a new certificate of authority on or
after January 1, 1994. Any grants and annuities society that holds a
certificate of authority on January 1, 1994, and that is not in
compliance with this subdivision as of that date, shall comply with
these amendments by January 1, 1998.
(b) Nothing in subdivision (a) shall prevent the certificate
holder from withdrawing from time to time, pursuant to an appropriate
resolution of its board of trustees, that amount or amounts as are
determined, in a manner which is satisfactory to the commissioner, to
be excess over and above its reserve required to be maintained under
the provisions of Section 11521.
(c) If the grants and annuities society will manage and direct
investment of the reserve funds required under Section 11521, the
California reserves may be held under a declaration of trust stating
that the grants and annuities society will hold the funds in trust
and invest funds or property held in trust in accordance with the
requirements of this code. If a bank will manage or direct the
investment of the California reserves fund, a trust agreement shall
be executed with that institution that will act as a trustee.
11521.2. (a) The reserve required by the table of commensurate
values for each annuity contract issued must be invested in
investments specified in Sections 1170 through 1182 except that a
certificate holder may invest in investment companies registered
under the federal Investment Company Act of 1940, and in securities,
including interests in those investment companies, listed and traded
on the New York Stock Exchange, the American Stock Exchange or
regional stock exchanges or the National Market System of the Nasdaq
Stock Market or successors to such exchanges or market having the
same qualifications, to the extent of the lesser of net worth (assets
over liabilities and reserves) of the certificate holder or 50
percent of these general investments. This section does not permit
investment in options or commodity exchanges.
(b) The certificate holder may invest in other investments as
permitted by and subject to the written consent of the commissioner.
11521.3. (a) Prior to admission each applicant shall file with the
commissioner an accurate and complete financial statement consisting
of a balance sheet and income and expense statement, showing the
current condition of the applicant and sworn to by the officer of the
applicant having the responsibility for preparing the statement.
(b) If the applicant is already transacting a grants and annuities
business in another state, an accurate and complete financial
statement showing the condition of the present grants and annuities
business, sworn to by the officer having the responsibility for
preparing the statement, shall be submitted.
(c) One hundred and twenty days after the end of their fiscal
year, every certificate holder, except a certificate holder that also
holds a certificate of authority pursuant to Article 3 (commencing
with Section 699) of Chapter 1 of Part 2 of Division 1, shall make
and file with the commissioner an accurate and complete financial
statement, consisting of a balance sheet and income and expense
statement, showing the current condition of the certificate holder's
grants and annuities operation on a form prescribed by the
commissioner.
11521.4. The commissioner may, in his discretion and after hearing,
require the disposal of any investment made in violation of the
provisions of this chapter; pending disposal pursuant to such order,
no value shall be allowed for such investment in any financial
statement or report required to be filed with the commissioner and
purporting to show the financial condition of the owner thereof for
the purpose of determining whether such owner is solvent or
insolvent.
11521.5. The commissioner may adopt reasonable rules and
regulations as may be necessary to carry out the provisions of this
chapter pursuant to the provisions of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code. Pursuant to these provisions, the commissioner may also amend
or repeal the rules and regulations.
11521.6. Nothing contained in Section 11521, 11521.1, 11521.2,
11521.4, 11523.6, or paragraph (6) of subdivision (a) of Section
11523 shall apply to any grants and annuities certificate holder that
also holds a certificate of authority pursuant to Article 3
(commencing with Section 699) of Chapter 1 of Part 2 of Division 1. A
grants and annuities certificate holder subject to this section
shall display clearly and conspicuously, and in the type specified,
the disclosure required by paragraph (7) of subdivision (a) of
Section 11523 in all agreements issued under this chapter.
11522. Every organization or person holding a certificate of
authority to receive transfers under this chapter shall make and file
with the commissioner information regarding each agreement entered
into between the permit or certificate holder and the transferor. The
information requested by the commissioner shall be provided in the
number, form, and format, at the intervals, and by the methods
prescribed by the commissioner. The organization or person shall pay
a basic fee to the commissioner for the filing of the requested
information. The basic fee as provided in this section shall be
established by rules and regulations adopted by the commissioner
pursuant to Section 11521.5 for information filed by the organization
or person where information is filed regarding up to 10 agreements
within any calendar quarter. Thereafter, within each calendar
quarter, the fee for information filed regarding each agreement shall
be as follows: 50 percent of the basic fee for information filed
regarding 11 to 20 agreements filed; 20 percent of the basic fee for
information filed regarding 21 to 30 agreements filed; 10 percent of
the basic fee for information filed regarding 31 to 40 agreements
filed; and 5 percent of the basic filing fee for information filed
regarding 41 or more agreements.
The fees as provided herein shall be paid with the filing of the
information regarding the agreements by the organization or person.
11523. (a) The annuity agreement shall show each of the following:
(1) The value of the property transferred.
(2) The amount of annuity agreed to be paid to the transferor or
his nominee.
(3) The manner in which, and the intervals at which, the annuity
is to be paid.
(4) The age, in years, at or nearest the date of the agreement, of
the person during whose life the annuity is to be paid.
(5) The effective date of the agreement.
(6) The signature of each donor.
(7) The following clause, in at least 12-point boldface type,
located on the same page as and in the immediate proximity of the
donor signature line: "Annuities are subject to regulation by the
State of California. Payments under this agreement, however, are not
protected or otherwise guaranteed by any government agency or the
California Life and Health Insurance Guarantee Association.
(b) Every organization or person holding a certificate of
authority to receive transfers under this chapter shall annually
certify to the commissioner that all agreements entered into during
the time period covered by the certification show all of the
information set forth in subdivision (a). The certification shall be
in the number, form, and format, by the method, and at the time
prescribed by the commissioner. The commissioner may from time to
time as he or she deems necessary require that a copy of each
agreement be submitted to the department.
11523.5. Any person holding a certificate of authority under this
chapter may reinsure its total liability under an annuity agreement
(as defined in Section 11523) with an admitted insurer for a single
premium. In such event, such certificate holder may take credit for
such reinsurance in reduction of the amount of the reserve fund it is
required to maintain under the provisions of Section 11521, subject
to the following conditions:
(a) Such certificate holder shall file with the commissioner a
copy of the reinsurance contract specifying which annuity agreement
previously filed pursuant to Section 11522 is thereby reinsured.
(b) Such certificate holder shall enter into a written agreement
with the annuitant and the reinsurer agreeing that if it should for
any reason be unable to continue the making of the annuity payments
required by its annuity agreement, the annuitant shall receive
payments directly from the reinsurer and that such reinsurer shall be
credited with all such direct payments in the accounts between it
and such reinsurer.
(c) Any commission granted by the reinsurer on the reinsurance
shall be payable only to the certificate holder which shall pay no
commission directly or on account of such reinsurance.
11523.6. No grants and annuities society applying for admission to
this state, or transacting in this state, the business described in
this chapter shall transact or be authorized to transact a variable
annuity business as described in Section 10506.
11524. Except as prescribed in this chapter, such organization or
person shall be otherwise exempt from the provisions of this code and
other insurance laws of this state, except the provisions of
Sections 730 to 736, inclusive, Sections 790 to 790.10, inclusive,
Section 1011, Sections 1012 to 1044, and Sections 1056.5 to 1061. The
cost and expense of examining such organization or person shall be
paid as prescribed in Section 736.
11520. The following organizations and persons may receive
transfers of property, conditioned upon their agreement to pay an
annuity to the transferor or the transferor's nominee, after
obtaining from the commissioner a certificate of authority so to do:
(a) Any charitable, religious, benevolent or educational
organization, pecuniary profit not being its object or purpose, after
being in active operation for at least 10 years; provided,
nevertheless, that 10 years of active operation shall not be required
in case of:
(1) A nonprofit corporation organized and controlled by a hospital
licensed by the State Department of Health Services as a general
acute care hospital pursuant to Chapter 2 (commencing with Section
1250) of Division 2 of the Health and Safety Code; and
(2) An incorporated educational institution offering courses of
instruction beyond high school, organized pursuant to Section 94757
of the Education Code, and which is, and for at least one year has
been, qualified pursuant to Chapter 7 (commencing with Section 94700)
of Part 59 of the Education Code to issue diplomas or degrees as
defined in Sections 94724 and 94726 of that code;
(b) Every organization or person maintaining homes for the aged
for pecuniary profit.
This section applies to organizations subject to and operating
under Chapter 10 (commencing with Section 1770) of Division 2 of the
Health and Safety Code.
(c) This section shall become operative on January 1, 1997.
11520.5. No person shall transact in this state the business
described in this chapter without first procuring a certificate of
authority from the commissioner for such purpose. Application for
such certificate shall be made on a form prescribed by the
commissioner accompanied by a filing fee of one thousand seven
hundred seventy dollars ($1,770). Such certificate shall not be
granted until the applicant conforms to the requirements of this
chapter and the laws of this state prerequisite to its issue. After
such issue the holder shall continue to comply with the requirements
of this chapter and the laws of this state. Where a hearing is held
under this section the proceedings shall be conducted in accordance
with Chapter 5 (commencing with Section 11500) of Part 1, Division 3,
Title 2 of the Government Code, and the commissioner shall have all
of the powers granted therein.
Subject to the annual fee provisions herein, every certificate of
authority issued or held under this chapter shall be for an
indefinite term and, unless sooner revoked by the commissioner, shall
terminate upon occurrence of any of the following:
(a) Upon the holder's ceasing to exist as a separate entity.
(b) Upon the winding up or dissolution, or expiration or
forfeiture of the corporate existence of a corporate holder thereof.
(c) Upon winding up or dissolution of a holder not a corporation.
(d) In any event upon surrender by the holder of its certificate
of authority and cancellation of the same by the commissioner.
The commissioner shall not cancel a surrendered certificate of
authority until he is satisfied by examination, or otherwise, that
the former holder has discharged its annuity liabilities to residents
of this state or satisfactorily reinsured the same.
Notwithstanding the preceding provisions for a certificate of
authority of indefinite term, each holder of a certificate of
authority under this chapter shall owe and pay in advance to the
commissioner in lawful money of the United States an annual fee of
fifty-eight dollars ($58) on account of such certificate of authority
until its final termination or revocation. Such fee shall be for
annual periods commencing on July 1st of each year and ending on June
30th of each year and shall be due on each March 1st and shall be
delinquent on and after each April 1st.
Each holder of a certificate of authority shall also be subject to
the payment in advance of the following fees, as appropriate:
(1) One hundred eighteen dollars ($118) for each amended
certificate of authority caused by a change of the name of the
holder.
(2) Eighty-nine dollars ($89) for the services and expenses of
the commissioner in connection with the filing of amended articles by
a holder.
(3) Three hundred fifty-four dollars ($354) for all services and
expenses of the commissioner in connection with the withdrawal of a
holder of a certificate of authority under this chapter.
11520.6. (a) 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.
(b) 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 set forth in
subdivision (a).
11521. Upon granting to such organization or person a certificate
of authority to receive such transfers, the commissioner shall
require it to establish and maintain a reserve fund adequate to meet
the future payments under its outstanding annuity contracts and in
any event not less than an amount computed as follows:
(a) In the case of annuities payable under agreements made prior
to January 1, 1950, in accordance with the standard of valuation
based upon McClintock's table of mortality among annuitants, with
interest assumption at 3 1/2 percent per annum.
(b) In the case of annuities payable under agreements made on and
after January 1, 1950, in accordance with the standard of valuation
based upon the 1937 Standard Annuity Table, with interest assumption
at 2 1/2 percent per annum, or other table of mortality derived from
recent annuity experience, with interest assumption not higher than
is currently yielded on safe securities, as may be prescribed by the
commissioner.
For any failure on its part to establish and maintain such reserve
fund, the commissioner shall revoke its certificate of authority.
11521.1. (a) The funds and other property, together with interest
and dividends thereon and proceeds therefrom, conditioned upon
issuance of the certificate holder's contracts to pay annuities,
shall be maintained under a separate trust agreement for reserves
held for the benefit of California annuitants and shall be held
legally and physically segregated from the other assets of the
certificate holder. The amendments to this subdivision enacted during
the 1993 portion of the 1993-94 Regular Session shall apply to any
organization that is issued a new certificate of authority on or
after January 1, 1994. Any grants and annuities society that holds a
certificate of authority on January 1, 1994, and that is not in
compliance with this subdivision as of that date, shall comply with
these amendments by January 1, 1998.
(b) Nothing in subdivision (a) shall prevent the certificate
holder from withdrawing from time to time, pursuant to an appropriate
resolution of its board of trustees, that amount or amounts as are
determined, in a manner which is satisfactory to the commissioner, to
be excess over and above its reserve required to be maintained under
the provisions of Section 11521.
(c) If the grants and annuities society will manage and direct
investment of the reserve funds required under Section 11521, the
California reserves may be held under a declaration of trust stating
that the grants and annuities society will hold the funds in trust
and invest funds or property held in trust in accordance with the
requirements of this code. If a bank will manage or direct the
investment of the California reserves fund, a trust agreement shall
be executed with that institution that will act as a trustee.
11521.2. (a) The reserve required by the table of commensurate
values for each annuity contract issued must be invested in
investments specified in Sections 1170 through 1182 except that a
certificate holder may invest in investment companies registered
under the federal Investment Company Act of 1940, and in securities,
including interests in those investment companies, listed and traded
on the New York Stock Exchange, the American Stock Exchange or
regional stock exchanges or the National Market System of the Nasdaq
Stock Market or successors to such exchanges or market having the
same qualifications, to the extent of the lesser of net worth (assets
over liabilities and reserves) of the certificate holder or 50
percent of these general investments. This section does not permit
investment in options or commodity exchanges.
(b) The certificate holder may invest in other investments as
permitted by and subject to the written consent of the commissioner.
11521.3. (a) Prior to admission each applicant shall file with the
commissioner an accurate and complete financial statement consisting
of a balance sheet and income and expense statement, showing the
current condition of the applicant and sworn to by the officer of the
applicant having the responsibility for preparing the statement.
(b) If the applicant is already transacting a grants and annuities
business in another state, an accurate and complete financial
statement showing the condition of the present grants and annuities
business, sworn to by the officer having the responsibility for
preparing the statement, shall be submitted.
(c) One hundred and twenty days after the end of their fiscal
year, every certificate holder, except a certificate holder that also
holds a certificate of authority pursuant to Article 3 (commencing
with Section 699) of Chapter 1 of Part 2 of Division 1, shall make
and file with the commissioner an accurate and complete financial
statement, consisting of a balance sheet and income and expense
statement, showing the current condition of the certificate holder's
grants and annuities operation on a form prescribed by the
commissioner.
11521.4. The commissioner may, in his discretion and after hearing,
require the disposal of any investment made in violation of the
provisions of this chapter; pending disposal pursuant to such order,
no value shall be allowed for such investment in any financial
statement or report required to be filed with the commissioner and
purporting to show the financial condition of the owner thereof for
the purpose of determining whether such owner is solvent or
insolvent.
11521.5. The commissioner may adopt reasonable rules and
regulations as may be necessary to carry out the provisions of this
chapter pursuant to the provisions of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code. Pursuant to these provisions, the commissioner may also amend
or repeal the rules and regulations.
11521.6. Nothing contained in Section 11521, 11521.1, 11521.2,
11521.4, 11523.6, or paragraph (6) of subdivision (a) of Section
11523 shall apply to any grants and annuities certificate holder that
also holds a certificate of authority pursuant to Article 3
(commencing with Section 699) of Chapter 1 of Part 2 of Division 1. A
grants and annuities certificate holder subject to this section
shall display clearly and conspicuously, and in the type specified,
the disclosure required by paragraph (7) of subdivision (a) of
Section 11523 in all agreements issued under this chapter.
11522. Every organization or person holding a certificate of
authority to receive transfers under this chapter shall make and file
with the commissioner information regarding each agreement entered
into between the permit or certificate holder and the transferor. The
information requested by the commissioner shall be provided in the
number, form, and format, at the intervals, and by the methods
prescribed by the commissioner. The organization or person shall pay
a basic fee to the commissioner for the filing of the requested
information. The basic fee as provided in this section shall be
established by rules and regulations adopted by the commissioner
pursuant to Section 11521.5 for information filed by the organization
or person where information is filed regarding up to 10 agreements
within any calendar quarter. Thereafter, within each calendar
quarter, the fee for information filed regarding each agreement shall
be as follows: 50 percent of the basic fee for information filed
regarding 11 to 20 agreements filed; 20 percent of the basic fee for
information filed regarding 21 to 30 agreements filed; 10 percent of
the basic fee for information filed regarding 31 to 40 agreements
filed; and 5 percent of the basic filing fee for information filed
regarding 41 or more agreements.
The fees as provided herein shall be paid with the filing of the
information regarding the agreements by the organization or person.
11523. (a) The annuity agreement shall show each of the following:
(1) The value of the property transferred.
(2) The amount of annuity agreed to be paid to the transferor or
his nominee.
(3) The manner in which, and the intervals at which, the annuity
is to be paid.
(4) The age, in years, at or nearest the date of the agreement, of
the person during whose life the annuity is to be paid.
(5) The effective date of the agreement.
(6) The signature of each donor.
(7) The following clause, in at least 12-point boldface type,
located on the same page as and in the immediate proximity of the
donor signature line: "Annuities are subject to regulation by the
State of California. Payments under this agreement, however, are not
protected or otherwise guaranteed by any government agency or the
California Life and Health Insurance Guarantee Association.
(b) Every organization or person holding a certificate of
authority to receive transfers under this chapter shall annually
certify to the commissioner that all agreements entered into during
the time period covered by the certification show all of the
information set forth in subdivision (a). The certification shall be
in the number, form, and format, by the method, and at the time
prescribed by the commissioner. The commissioner may from time to
time as he or she deems necessary require that a copy of each
agreement be submitted to the department.
11523.5. Any person holding a certificate of authority under this
chapter may reinsure its total liability under an annuity agreement
(as defined in Section 11523) with an admitted insurer for a single
premium. In such event, such certificate holder may take credit for
such reinsurance in reduction of the amount of the reserve fund it is
required to maintain under the provisions of Section 11521, subject
to the following conditions:
(a) Such certificate holder shall file with the commissioner a
copy of the reinsurance contract specifying which annuity agreement
previously filed pursuant to Section 11522 is thereby reinsured.
(b) Such certificate holder shall enter into a written agreement
with the annuitant and the reinsurer agreeing that if it should for
any reason be unable to continue the making of the annuity payments
required by its annuity agreement, the annuitant shall receive
payments directly from the reinsurer and that such reinsurer shall be
credited with all such direct payments in the accounts between it
and such reinsurer.
(c) Any commission granted by the reinsurer on the reinsurance
shall be payable only to the certificate holder which shall pay no
commission directly or on account of such reinsurance.
11523.6. No grants and annuities society applying for admission to
this state, or transacting in this state, the business described in
this chapter shall transact or be authorized to transact a variable
annuity business as described in Section 10506.
11524. Except as prescribed in this chapter, such organization or
person shall be otherwise exempt from the provisions of this code and
other insurance laws of this state, except the provisions of
Sections 730 to 736, inclusive, Sections 790 to 790.10, inclusive,
Section 1011, Sections 1012 to 1044, and Sections 1056.5 to 1061. The
cost and expense of examining such organization or person shall be
paid as prescribed in Section 736.
11520. The following organizations and persons may receive
transfers of property, conditioned upon their agreement to pay an
annuity to the transferor or the transferor's nominee, after
obtaining from the commissioner a certificate of authority so to do:
(a) Any charitable, religious, benevolent or educational
organization, pecuniary profit not being its object or purpose, after
being in active operation for at least 10 years; provided,
nevertheless, that 10 years of active operation shall not be required
in case of:
(1) A nonprofit corporation organized and controlled by a hospital
licensed by the State Department of Health Services as a general
acute care hospital pursuant to Chapter 2 (commencing with Section
1250) of Division 2 of the Health and Safety Code; and
(2) An incorporated educational institution offering courses of
instruction beyond high school, organized pursuant to Section 94757
of the Education Code, and which is, and for at least one year has
been, qualified pursuant to Chapter 7 (commencing with Section 94700)
of Part 59 of the Education Code to issue diplomas or degrees as
defined in Sections 94724 and 94726 of that code;
(b) Every organization or person maintaining homes for the aged
for pecuniary profit.
This section applies to organizations subject to and operating
under Chapter 10 (commencing with Section 1770) of Division 2 of the
Health and Safety Code.
(c) This section shall become operative on January 1, 1997.
11520.5. No person shall transact in this state the business
described in this chapter without first procuring a certificate of
authority from the commissioner for such purpose. Application for
such certificate shall be made on a form prescribed by the
commissioner accompanied by a filing fee of one thousand seven
hundred seventy dollars ($1,770). Such certificate shall not be
granted until the applicant conforms to the requirements of this
chapter and the laws of this state prerequisite to its issue. After
such issue the holder shall continue to comply with the requirements
of this chapter and the laws of this state. Where a hearing is held
under this section the proceedings shall be conducted in accordance
with Chapter 5 (commencing with Section 11500) of Part 1, Division 3,
Title 2 of the Government Code, and the commissioner shall have all
of the powers granted therein.
Subject to the annual fee provisions herein, every certificate of
authority issued or held under this chapter shall be for an
indefinite term and, unless sooner revoked by the commissioner, shall
terminate upon occurrence of any of the following:
(a) Upon the holder's ceasing to exist as a separate entity.
(b) Upon the winding up or dissolution, or expiration or
forfeiture of the corporate existence of a corporate holder thereof.
(c) Upon winding up or dissolution of a holder not a corporation.
(d) In any event upon surrender by the holder of its certificate
of authority and cancellation of the same by the commissioner.
The commissioner shall not cancel a surrendered certificate of
authority until he is satisfied by examination, or otherwise, that
the former holder has discharged its annuity liabilities to residents
of this state or satisfactorily reinsured the same.
Notwithstanding the preceding provisions for a certificate of
authority of indefinite term, each holder of a certificate of
authority under this chapter shall owe and pay in advance to the
commissioner in lawful money of the United States an annual fee of
fifty-eight dollars ($58) on account of such certificate of authority
until its final termination or revocation. Such fee shall be for
annual periods commencing on July 1st of each year and ending on June
30th of each year and shall be due on each March 1st and shall be
delinquent on and after each April 1st.
Each holder of a certificate of authority shall also be subject to
the payment in advance of the following fees, as appropriate:
(1) One hundred eighteen dollars ($118) for each amended
certificate of authority caused by a change of the name of the
holder.
(2) Eighty-nine dollars ($89) for the services and expenses of
the commissioner in connection with the filing of amended articles by
a holder.
(3) Three hundred fifty-four dollars ($354) for all services and
expenses of the commissioner in connection with the withdrawal of a
holder of a certificate of authority under this chapter.
11520.6. (a) 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.
(b) 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 set forth in
subdivision (a).
11521. Upon granting to such organization or person a certificate
of authority to receive such transfers, the commissioner shall
require it to establish and maintain a reserve fund adequate to meet
the future payments under its outstanding annuity contracts and in
any event not less than an amount computed as follows:
(a) In the case of annuities payable under agreements made prior
to January 1, 1950, in accordance with the standard of valuation
based upon McClintock's table of mortality among annuitants, with
interest assumption at 3 1/2 percent per annum.
(b) In the case of annuities payable under agreements made on and
after January 1, 1950, in accordance with the standard of valuation
based upon the 1937 Standard Annuity Table, with interest assumption
at 2 1/2 percent per annum, or other table of mortality derived from
recent annuity experience, with interest assumption not higher than
is currently yielded on safe securities, as may be prescribed by the
commissioner.
For any failure on its part to establish and maintain such reserve
fund, the commissioner shall revoke its certificate of authority.
11521.1. (a) The funds and other property, together with interest
and dividends thereon and proceeds therefrom, conditioned upon
issuance of the certificate holder's contracts to pay annuities,
shall be maintained under a separate trust agreement for reserves
held for the benefit of California annuitants and shall be held
legally and physically segregated from the other assets of the
certificate holder. The amendments to this subdivision enacted during
the 1993 portion of the 1993-94 Regular Session shall apply to any
organization that is issued a new certificate of authority on or
after January 1, 1994. Any grants and annuities society that holds a
certificate of authority on January 1, 1994, and that is not in
compliance with this subdivision as of that date, shall comply with
these amendments by January 1, 1998.
(b) Nothing in subdivision (a) shall prevent the certificate
holder from withdrawing from time to time, pursuant to an appropriate
resolution of its board of trustees, that amount or amounts as are
determined, in a manner which is satisfactory to the commissioner, to
be excess over and above its reserve required to be maintained under
the provisions of Section 11521.
(c) If the grants and annuities society will manage and direct
investment of the reserve funds required under Section 11521, the
California reserves may be held under a declaration of trust stating
that the grants and annuities society will hold the funds in trust
and invest funds or property held in trust in accordance with the
requirements of this code. If a bank will manage or direct the
investment of the California reserves fund, a trust agreement shall
be executed with that institution that will act as a trustee.
11521.2. (a) The reserve required by the table of commensurate
values for each annuity contract issued must be invested in
investments specified in Sections 1170 through 1182 except that a
certificate holder may invest in investment companies registered
under the federal Investment Company Act of 1940, and in securities,
including interests in those investment companies, listed and traded
on the New York Stock Exchange, the American Stock Exchange or
regional stock exchanges or the National Market System of the Nasdaq
Stock Market or successors to such exchanges or market having the
same qualifications, to the extent of the lesser of net worth (assets
over liabilities and reserves) of the certificate holder or 50
percent of these general investments. This section does not permit
investment in options or commodity exchanges.
(b) The certificate holder may invest in other investments as
permitted by and subject to the written consent of the commissioner.
11521.3. (a) Prior to admission each applicant shall file with the
commissioner an accurate and complete financial statement consisting
of a balance sheet and income and expense statement, showing the
current condition of the applicant and sworn to by the officer of the
applicant having the responsibility for preparing the statement.
(b) If the applicant is already transacting a grants and annuities
business in another state, an accurate and complete financial
statement showing the condition of the present grants and annuities
business, sworn to by the officer having the responsibility for
preparing the statement, shall be submitted.
(c) One hundred and twenty days after the end of their fiscal
year, every certificate holder, except a certificate holder that also
holds a certificate of authority pursuant to Article 3 (commencing
with Section 699) of Chapter 1 of Part 2 of Division 1, shall make
and file with the commissioner an accurate and complete financial
statement, consisting of a balance sheet and income and expense
statement, showing the current condition of the certificate holder's
grants and annuities operation on a form prescribed by the
commissioner.
11521.4. The commissioner may, in his discretion and after hearing,
require the disposal of any investment made in violation of the
provisions of this chapter; pending disposal pursuant to such order,
no value shall be allowed for such investment in any financial
statement or report required to be filed with the commissioner and
purporting to show the financial condition of the owner thereof for
the purpose of determining whether such owner is solvent or
insolvent.
11521.5. The commissioner may adopt reasonable rules and
regulations as may be necessary to carry out the provisions of this
chapter pursuant to the provisions of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code. Pursuant to these provisions, the commissioner may also amend
or repeal the rules and regulations.
11521.6. Nothing contained in Section 11521, 11521.1, 11521.2,
11521.4, 11523.6, or paragraph (6) of subdivision (a) of Section
11523 shall apply to any grants and annuities certificate holder that
also holds a certificate of authority pursuant to Article 3
(commencing with Section 699) of Chapter 1 of Part 2 of Division 1. A
grants and annuities certificate holder subject to this section
shall display clearly and conspicuously, and in the type specified,
the disclosure required by paragraph (7) of subdivision (a) of
Section 11523 in all agreements issued under this chapter.
11522. Every organization or person holding a certificate of
authority to receive transfers under this chapter shall make and file
with the commissioner information regarding each agreement entered
into between the permit or certificate holder and the transferor. The
information requested by the commissioner shall be provided in the
number, form, and format, at the intervals, and by the methods
prescribed by the commissioner. The organization or person shall pay
a basic fee to the commissioner for the filing of the requested
information. The basic fee as provided in this section shall be
established by rules and regulations adopted by the commissioner
pursuant to Section 11521.5 for information filed by the organization
or person where information is filed regarding up to 10 agreements
within any calendar quarter. Thereafter, within each calendar
quarter, the fee for information filed regarding each agreement shall
be as follows: 50 percent of the basic fee for information filed
regarding 11 to 20 agreements filed; 20 percent of the basic fee for
information filed regarding 21 to 30 agreements filed; 10 percent of
the basic fee for information filed regarding 31 to 40 agreements
filed; and 5 percent of the basic filing fee for information filed
regarding 41 or more agreements.
The fees as provided herein shall be paid with the filing of the
information regarding the agreements by the organization or person.
11523. (a) The annuity agreement shall show each of the following:
(1) The value of the property transferred.
(2) The amount of annuity agreed to be paid to the transferor or
his nominee.
(3) The manner in which, and the intervals at which, the annuity
is to be paid.
(4) The age, in years, at or nearest the date of the agreement, of
the person during whose life the annuity is to be paid.
(5) The effective date of the agreement.
(6) The signature of each donor.
(7) The following clause, in at least 12-point boldface type,
located on the same page as and in the immediate proximity of the
donor signature line: "Annuities are subject to regulation by the
State of California. Payments under this agreement, however, are not
protected or otherwise guaranteed by any government agency or the
California Life and Health Insurance Guarantee Association.
(b) Every organization or person holding a certificate of
authority to receive transfers under this chapter shall annually
certify to the commissioner that all agreements entered into during
the time period covered by the certification show all of the
information set forth in subdivision (a). The certification shall be
in the number, form, and format, by the method, and at the time
prescribed by the commissioner. The commissioner may from time to
time as he or she deems necessary require that a copy of each
agreement be submitted to the department.
11523.5. Any person holding a certificate of authority under this
chapter may reinsure its total liability under an annuity agreement
(as defined in Section 11523) with an admitted insurer for a single
premium. In such event, such certificate holder may take credit for
such reinsurance in reduction of the amount of the reserve fund it is
required to maintain under the provisions of Section 11521, subject
to the following conditions:
(a) Such certificate holder shall file with the commissioner a
copy of the reinsurance contract specifying which annuity agreement
previously filed pursuant to Section 11522 is thereby reinsured.
(b) Such certificate holder shall enter into a written agreement
with the annuitant and the reinsurer agreeing that if it should for
any reason be unable to continue the making of the annuity payments
required by its annuity agreement, the annuitant shall receive
payments directly from the reinsurer and that such reinsurer shall be
credited with all such direct payments in the accounts between it
and such reinsurer.
(c) Any commission granted by the reinsurer on the reinsurance
shall be payable only to the certificate holder which shall pay no
commission directly or on account of such reinsurance.
11523.6. No grants and annuities society applying for admission to
this state, or transacting in this state, the business described in
this chapter shall transact or be authorized to transact a variable
annuity business as described in Section 10506.
11524. Except as prescribed in this chapter, such organization or
person shall be otherwise exempt from the provisions of this code and
other insurance laws of this state, except the provisions of
Sections 730 to 736, inclusive, Sections 790 to 790.10, inclusive,
Section 1011, Sections 1012 to 1044, and Sections 1056.5 to 1061. The
cost and expense of examining such organization or person shall be
paid as prescribed in Section 736.
