BILL ANALYSIS AB 41 Page 1 Date of Hearing: January 6, 2010 ASSEMBLY COMMITTEE ON INSURANCE Jose Solorio, Chair AB 41 (Solorio) - As Amended: January 4, 2010 SUBJECT : Community Development Investments by Insurers SUMMARY : Extends to January 1, 2015, the sunset date on the requirement that insurers biennially provide to the Insurance Commissioner (IC) information on community development investments, and requires major California insurers to develop and file with the IC their company's policy statement regarding community development investments. Specifically, this bill : 1)Extends from January 1, 2011 to January 1, 2015 the sunset date on the requirement that insurers biennially provide to the IC information on community development investments. 2)Requires insurers writing $100 million or more annually in premiums in California to develop and file with the IC a policy statement that expresses the goals of the company regarding community development investments. 3)Requires the IC to establish a link on its Internet website that provides access to the public of the contents of each insurer's policy statement and the data on community development investments made by each insurer writing $100 million or more in premiums annually in California. 4)Allows insurers that are members of a holding company system to file community development investment data through a single filing, provided the data accurately reflects the investments made by each of the affiliated insurers. 5)Allows insurers to report community development investment data through a filing made by a Community Development Financial Institution when specified conditions are met. EXISTING LAW : 1)Requires insurance companies to provide information biennially to the IC on all community development investments they make in the state. This requirement will sunset on January 1, 2011. AB 41 Page 2 2)Defines a community development investment as one in which all or a portion of the investment has the primary purpose of community development or that it directly benefits low-income or moderate-income people in California. Qualifying investments include community facilities, economic development that includes job creation, affordable housing, commercial properties located in designated areas, and infrastructure investments for community development. 3)Requires the IC to provide information biennially on the Department of Insurance's Internet website on the aggregate insurer community development investments. FISCAL EFFECT : Negligible state costs. COMMENTS : 1)Purpose of bill. The purpose of this bill is to encourage insurance companies to increase the amount of community development investments made in California in order to improve the livability and prosperity of communities while improving the bottom line of insurers. 2)Background. In 2007, the Assembly Insurance Committee held an informational hearing on investments in urban and economically disadvantaged communities. The Committee obtained data and heard testimony from representatives of the banking, public utilities, and insurance industries. Among the findings from that hearing were: Banks and public utilities make more community development investments than insurers but banks and utilities initially resisted making these investments as they did not realize the benefits of these investments. Banks now compete against other institutions in order to make community development investments because they are recognized as profitable. A large number of insurance companies have no investments that would qualify as community development investments. Some insurers have made significant community development investments while others make only minor community development investments. 1)Survey Findings. In 2008, the Department of Insurance AB 41 Page 3 released the findings from a survey of insurers that found that only 54 of 485 insurance Companies had adopted a policy regarding community development investments. An important finding from that survey is that insurance companies with a comprehensive plan and/or specific goals have significantly increased their community development investments. 2)Clarifying Amendment: The Association of California Life and Health Insurance Companies (ACLHIC) has expressed concern with the provision of the bill regarding the definition of "policy statement." The concern is that the bill could require specific numeric goals and quantitative measures. The following amendment (on page 5, line 31 of the bill) addresses this concern: The policy statement may include general goals or specific investment goals, but it is not required to contain specific investment goals or thresholds . 3)Prior Legislation. This bill is nearly identical to AB 1910 (Coto) of the 2007-08 Session. AB 1910 was approved by the Legislature then subsequently vetoed by the Governor. The Governor's veto message said: "The historic delay in passing the 2008-09 State Budget has forced me to prioritize the bills sent to my desk at the end of the year's legislative session. Given the delay, I am only signing bills that are the highest priority for California. This bill does not meet that standard and I cannot sign it at this time." That was a generic veto message sent in connection with a significant number of bills in 2008. REGISTERED SUPPORT / OPPOSITION : Support The Greenlining Institute Opposition None received. AB 41 Page 4 Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086