(a) Reserves.

1. (1) Each corporation or municipality shall maintain reserves with respect to the annuity or income stream that it has agreed to pay to a charitable donor by:

   1. (A) Using the manner set forth in the Standard Valuation Law for Life Insurance and Annuities, Arkansas Code § 23-84-101 et seq., concerning the standard valuation law for life insurance and annuities;
   2. (B) Using the present value of all future benefits to be paid to the donor annuitant based upon the most recent mortality table published by the Internal Revenue Service; or
   3. (C) Maintaining account reserves in an amount equal to the aggregate values determined at the dates of contribution of all assets received from donors with respect to annuities for annuitants who are then living.
2. (2) The municipality shall maintain reserves as part of the separate assets of the municipal program.

3. (3) If the Insurance Commissioner finds the reserve established by a permit holder inadequate at any time, the commissioner:

   1. (A) Shall order the permit holder to increase its reserve accordingly; or
   2. (B) May stipulate the reserving method for the permit holder to rectify the reserve deficiency.
4. (4) In determining reserves, a deduction shall be made for all or any portion of an annuity risk that is reinsured by a life insurance company authorized to do business in this state.

(b) Accounts.

1. (1) Unless otherwise permitted by the commissioner, each permit holder shall maintain a segregated account or accounts for its charitable gift annuities.
2. (2) The segregated account or accounts shall be used solely to pay the charitable gift annuity obligations of the permit holder.

(c) Assets.

1. (1) Each permit holder shall maintain net admitted assets at least equal to the greater of:

   1. (A) The sum of its reserves on its outstanding agreements, all other liabilities, and a surplus of at least ten percent (10%) of the reserves;
   2. (B) The amount of fifty thousand dollars ($50,000); or
   3. (C) At least equal to the amount of the reserves plus all other outstanding liabilities, if reserves have been calculated by maintaining reserves in an amount equal to the aggregate values determined at the dates of contribution of all assets received from donors with respect to annuities for annuitants who are then living.

2. (2) The required admitted assets shall be invested:

   1. (A) Only in securities permitted by the provisions of Arkansas Code §§ 23-63-801 – 23-63-833, 23-63-835, 23-63-836, 23-63-839, and 23-63-840; or
   2. (B) In accordance with the provisions of the prudent investor rule stated in Arkansas Code §§ 24-2-610 – 24-2-619.
3. (3) The investments shall be held by a custodian in accordance with Arkansas Code § 23-69-134(b)(4).

(d) Annual statements.

1. (1) All permit holders shall be required to file an annual financial statement of their operations and accounts and schedule of outstanding annuities with applicable reserves within ninety (90) days of the end of their fiscal year.
2. (2) The statement shall be prepared by a certified public accountant in accordance with generally accepted accounting principles detailing the financial condition and status of the corporation or municipal program as of the conclusion of its most recent fiscal year.

3. (3) For permit holders investing in assets under subdivision (c)(2)(B) of this section, each annual statement shall be accompanied by:

   1. (A) A description of the permit holder's investment philosophy for charitable gift annuities and how the investments of the permit holder are designed to meet future charitable gift annuity obligations;
   2. (B) A statement from the permit holder identifying the members of the investment committee charged with making investment decisions regarding charitable gift annuity assets, including a description of each committee member's investment expertise; and
   3. (C) A certification of the permit holder’s directors that attests that its investments and investment transactions match the organization's philosophy and meet the standards of the prudent investor rule stated in Arkansas Code §§ 24-2-610 – 24-2-619.