BILL NUMBER: AB 2142	CHAPTERED  06/30/02

	CHAPTER  84
	FILED WITH SECRETARY OF STATE  JUNE 30, 2002
	APPROVED BY GOVERNOR  JUNE 28, 2002
	PASSED THE SENATE  JUNE 17, 2002
	PASSED THE ASSEMBLY  MAY 16, 2002

INTRODUCED BY   Assembly Member Chavez

                        FEBRUARY 20, 2002

   An act to amend Section 12114 of the Insurance Code, relating to
insurance.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2142, Chavez.  Financial guaranty insurance.
   Existing law regulates insurers transacting financial guaranty
insurance.  Existing law requires at least 95% of a financial
guaranty insurance corporation's outstanding total net liability on
specified obligations, including corporate obligations, partnership
obligations, and asset-backed securities, to be investment grade.
   This bill would exempt corporate obligations, partnership
obligations, and asset-backed securities from that investment
requirement governing financial guaranty insurance corporations.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 12114 of the Insurance Code is amended to read:

   12114.  (a) At least 95 percent of a financial guaranty insurance
corporation's outstanding total net liability on the kinds of
obligations enumerated in subparagraphs (A), (B), and (C) of
paragraph (1) of subdivision (b) of Section 12112 shall be investment
grade.
   (b) The financial guaranty insurance corporation shall at all
times maintain capital, surplus, and contingency reserve in the
aggregate no less than the sum of the following:
   (1) 0.3333 percent of the total net liability under guaranties of
municipal bonds and utility first mortgage obligations.
   (2) 0.6666 percent of the total net liability under guaranties of
investment grade asset-backed securities.
   (3) 1.0 percent of the total net liability under guaranties,
secured by collateral or having a term of seven years or less of:
   (A) Investment grade industrial development bonds, and
   (B) Other investment grade obligations.
   (4) 1.5 percent of the total net liability under guaranties of
other investment grade obligations.
   (5) 2.0 percent of the total net liability under guaranties of:
   (A) Noninvestment grade consumer debt obligations, and
   (B) Noninvestment grade asset-backed securities.
   (6) 3.0 percent of the total net liability under guaranties of
noninvestment grade obligations secured by first mortgages on
commercial real estate and having loan-to-value ratios of 80 percent
or less.
   (7) 5.0 percent of the total net liability under guaranties of
other noninvestment grade obligations.
   (8) If the amount of collateral required by paragraph (3) of
subdivision (b) is no longer maintained, that proportion of the
obligation insured which is not so collateralized shall be subject to
the aggregate limits specified in paragraph (4) of subdivision (b).

   (9) Additional surplus determined by the commissioner to be
adequate to support the writing of surety insurance if the financial
guaranty insurance corporation has been admitted to transact surety
insurance as authorized by subdivision (a) of Section 12102.