BILL ANALYSIS
AB 299
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Date of Hearing: April 1, 2009
ASSEMBLY COMMITTEE ON INSURANCE
Joe Coto, Chair
AB 299 (Insurance Committee) - As Introduced: February 17,
2009
SUBJECT : Insurance
SUMMARY : Makes a series of changes to laws governing the
authority and duties of the Insurance Commissioner (IC) and
insurance companies to clarify and update existing law.
Specifically, this bill :
1)Requires the IC to mail a notice every four years to every
domestic insurer (i.e., California-based insurance company),
specifying the "reciprocal states." A "reciprocal state" is a
state with laws that prohibit an insurer based in that state
from insuring the lives or property located in California
unless that insurer holds a valid certificate of authority
issued by the IC.
2)Requires the IC to also consider the following in determining
the nature and frequency of an examination of an insurer:
market analysis results including consumer complaint analysis,
evaluation of recent and ongoing regulatory activities, and
analysis of data derived from industry surveys or
interrogations and other criteria in the Market Regulation
Handbook adopted by the National Association of Insurance
Commissioners (NAIC).
3)Allows the IC to use and, if appropriate, to make public any
market analysis data discovered during the course of an
examination in the furtherance of a legal or regulatory action
which the Commissioner deems appropriate.
4)Requires insurer analyses to be at the expense of the insurer
when the IC considerers the results of financial statement
analyses, market analysis results, consumer complaints
analysis, and analysis of data derived from industry surveys
or interrogations.
5)Requires the mandatory annual audit of all insurers doing
business in this state to include required auditor and
management reporting in conformity with the standards adopted
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by the NAIC.
6)Allows, in addition, domestic incorporated insurers to invest
in credit unions to the extent the accounts are insured by an
agency or instrumentality of the federal government.
7)Limits the percentage of excess funds investments that can be
made in a loan or any other obligation to any one borrower,
including all affiliates, to 10 percent of the capital stock
and surplus or one percent of the admitted assists of the
lending insurer, whichever amount is greater.
8)Requires policies of automobile insurance to provide for the
replacement of a child passenger restraint system that was in
use by a child during an accident, or if the child passenger
restraint system was in the vehicle and it sustained a loss
covered by the policy.
EXISTING LAW
1)Requires the IC to annually mail a notice to every domestic
insurer, specifying the "reciprocal states." A domestic
insurer is prohibited from selling insurance in a "reciprocal
state" unless the insurer is authorized pursuant to the laws
of that other state to transact insurance;
2)Authorizes the IC to examine any insurer as often as he/he
deems it appropriate, and requires the IC to conduct an
examination of every "admitted insurer" at least once every
five years. (An "admitted insurer" is an insurance company
entitled to transact insurance in this state as a result of a
meeting the conditions required by law.) In determining the
nature and frequency of the examination, the IC shall consider
the results of financial statement analysis and ratios,
changes in management or ownership, actuarial opinions,
reports or independent certified public accountants, and other
criteria set forth in the Examiner's Handbook adopted by the
NAIC;
3)Allows the IC to use and, if appropriate, to make public any
final or preliminary examination report, any examiner or
company work papers or other documents, or other information
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discovered during the course of the examination in the
furtherance of a legal or regulatory action which the IC deems
appropriate;
4)Requires the expense of insurer examination incurred by the IC
to be payable by the insurers, except the special examinations
which are in addition to regular examinations may be at the
expense of the state in the discretion of the IC;
5)Requires all insurers doing business in this state to have an
annual audit conducted by an independent certified public
accountant. The audit shall be conducted in conformity with
the Annual Audited Financial Reports instructions contained in
the annual statement instructions adopted by the NAIC;
6)Authorizes the IC to grant a 30-day extension of the filing of
the annual audit upon a showing by the insurer and its
independent certificated public accountant of the reasons for
the extension and requires determination by the IC of
substantial cause for an extension;
7)Requires requests for an extension to be submitted in writing
within 20 days of the due date;
8)Requires the IC to permit the deposit of securities on behalf
of policyholders and creditors of the insurer in the State
Treasury. This provision also states that this authority is
subject to two obsolete sections of law, if applicable;
9)Allows domestic incorporated insurers to invest their assets
in the purchase of certain securities or in loans upon such
securities if they conform to specified conditions including,
in connection with loans not governed by an obsolete code
section, the amount loaned does not exceed 85% of the market
value;
10)Allows domestic incorporated insurers to invest their assets
in accounts in banks or savings and loan associations to the
extent the accounts are insured by an agency or
instrumentality of the federal government;
11)Limits the percentage of excess funds investments that can be
made in a loan to any one borrower, including all affiliates,
to 10% of the capital stock and surplus or 1% of the admitted
assets of the lending insurer, which ever amount is greater;
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12)Requires policies of automobile insurance to provide for the
replacement of a child passenger restraint system that was in
use by a child during an accident. This applies to automobile
liability insurance, automobile collision coverage, and
automobile physical damage coverage.
FISCAL EFFECT : Minor absorbable workload to California
Department of Insurance to continue oversight of insurers and
insurance products.
COMMENTS :
1)This committee bill incorporates a series of corrective and
clarifying amendments suggested by the Department of
Insurance. The provisions in the present version of the bill
have been reviewed by all the interested parties, and there is
no opposition;
2)This bill is identical to the enrolled version of AB 3054
(Insurance Committee) from 2008. AB 3054 was vetoed by the
Governor based on the "generic" veto message that was used for
low priority bills.
GOVERNOR'S VETO MESSAGE :
"The historic delay in passing the 2008-2009 State Budget has
forced me to prioritize the bills sent to my desk at the end of
the year's legislation session. Given the delay, I am only
signing bills that are the highest priority of California. This
bill does not meet the standard and I cannot sign it at this
time."
The Governor's office has advised the committee that there is no
reason not to pursue this bill again.
REGISTERED SUPPORT / OPPOSITION :
Support
California Department of Insurance (Sponsor)
Opposition
None on file.
AB 299
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Analysis Prepared by : Tracy Elwell / INS. / (916) 319-2086