Extreme Market Volatility = CGA Risk Management Time
Charitable Solutions has been obsessing on gift annuity risk management since the 90s. In fact, other than non-cash asset solutions, charitable gift annuity risk management is one of our core services. Why?
- FIRST: CGAs are one of the only gifts where the charity can actually lose more money than the original donation!
- SECOND: No one else is really focused on all risk management facets.
- THIRD: People seem to become very focused on risk management when it's too late. When markets become volatile, our work ramps up quickly. In 2008, we worked 7 days a week over a 7-month period with two actuaries and completed 120 pool risk audits.
So here we are--in another volatile market! What can you do? And what are some helpful resources?
Assess Your Risk
Charitable Solutions has had an actuary on staff since our founding in 2003. We have also built a CGA Mortality table for the Society of Actuaries (the riveting study can be seen here https://charitablesolutionsllc
Transfer CGA Risk
We have helped design three insurance carrier reinsurance contracts and have placed over 2,000 reinsurance cases since 1997. It is the only type of insurance we provide. Reinsurance allows the charity to transfer the investment and mortality risk to an insurance company – it provides a known amount at a known point in time. In most cases, charities do this with large concentrated risks, situations where the charity or donor wants to see the money used immediately for the intended purpose or where the charity is very risk averse. There are many situations where reinsurance doesn’t work well – basically, the opposite of all of these characteristics. We work with 26 carriers to provide full quote bids in all 50 states, and have written every peer-reviewed published article on the topic in the last 25 years – see most here https://charitablesolutionsllc
Avoid CGA Risk
We developed the National Gift Annuity Foundation so charities could fully outsource gift annuities and still receive 100% of the residuum. In 2017, we had about 50 contracts and $4.5 million in assets. Today, we have 520 contracts and $36 million in assets. We are now the nation’s largest independent CGA platform and continue to grow rapidly. We can issue CGAs in 49 states, have a $20K minimum and can receive illiquid donations (e.g., S-corp stock, real estate, other private business interests, retained life estates). You can see more here www.nationalgiftannuity.org.
Don't Delay!
Don’t make the mistake we see over and over – waiting too late to get a pool or large CGA assessment! When the pool or CGA is healthy we have about a dozen possible approaches. When charities wait until the bottom has dropped out (or the annuitant is calling you after winning the 100+ age group in the Ironman!), it is too late. Another mistake is relying on FASB or State Reserve Reports to assess the health of the pool – they don’t and most always understate the liability… especially for restricted pools.
Let NGAF help you increase your CGA program by tapping your donors’ vast reservoir of unique assets. Real estate, business interests, and other hard to liquidate assets can be used in this way. We can issue annuity contracts of this type in virtually any state of the union. More information on the NGAF is available at www.nationalgiftannuity.org, or you can give us a call at 888-811-NGAF.
Thanks as always for considering the benefits of charitable annuities for your clients, whether funded by cash or other illiquid assets.
Johnne Syverson, VP Gift Annuity Services
Mike Carey, VP NGAF
Alex Sedor, Dir of Gift Administration
Bryan Clontz, President
404-375-5496