BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   AB 299|
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                                 THIRD READING


          Bill No:  AB 299
          Author:   Assembly Insurance Committee 
          Amended:  7/15/09 in Senate
          Vote:     21

           
           SENATE BANKING, FINANCE, AND INS. COMMITTEE  :  11-0, 7/9/09
          AYES:  Calderon, Cogdill, Correa, Cox, Florez, Kehoe, Liu,  
            Lowenthal, Padilla, Price, Runner
          NO VOTE RECORDED:  Harman

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  78-1, 5/11/09 - See last page for vote


           SUBJECT  :    Insurance

           SOURCE  :     Department of Insurance


           DIGEST  :    This bill makes a number of technical,  
          corrective and clarifying amendments to the Insurance Code  
          and the Vehicle Code.  

           ANALYSIS  :    

          Existing law:

          1. Requires the Insurance Commissioner (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  
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             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/she 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 meeting the conditions  
             required by law.)  In determining the nature and  
             frequency of the examination, the IC shall consider the  
             results of financial statement analyses and ratios,  
             changes in management or ownership, actuarial opinions,  
             reports of independent certified public accountants, and  
             other criteria set forth in the Examiner's Handbook  
             adopted by the National Association of Insurance  
             Commissioners (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 discovered during the course of the  
             examination in the furtherance of a legal or regulatory  
             action which the IC deems appropriate.
           
          4. Requires the expenses of insurer examinations incurred  
             by the IC to be payable by the insurers, except that  
             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 on the  
             filing of the annual audit upon a showing by the insurer  
             and its independent certified public accountant of the  
             reasons for the extension request and the determination  
             by the IC of substantial cause for an extension.








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          7. Requires requests for an extension to be submitted in  
             writing within 20 days of the due date.
           
          8. Allows domestic incorporated insurers to invest 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.
           
          9. Limits the percentage of excess funds investments that  
             can be made in a loan to any one borrower, including all  
             affiliates, to 10 percent of the capital stock and  
             surplus or one percent of the admitted assets of the  
             lending insurer, whichever amount is greater.
           
          This bill makes a series of technical non-controversial  
          changes to laws governing the authority and duties of the  
          IC and insurance companies. Specifically, this bill:
           
          1. Requires the IC to mail a notice every four years to  
             every domestic insurer (i.e., California-domiciled  
             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. Adds the following information on which the IC is  
             required to consider when determining the nature and  
             frequency of an examination of an insurer: 

             A.    Market analysis results including consumer  
                complaint analysis, evaluation of recent and ongoing  
                regulatory activities.

             B.    Analysis of data derived from industry surveys or  
                interrogatories. 

             C.    Other criteria in the Market Regulation Handbook  
                adopted by the NAIC.

          3. Adds market analysis data to the list of information  
             that may be shared with other government entities and to  
             the NAIC, provided that the recipient of the information  
             agrees to main confidentiality of the information.







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          4. Clarifies that insurer analyses as required in Section  
             730 to be at the expense of the insurer.

          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 by the NAIC.

          6. Permits the IC to grant multiple 30-day extension and  
             require insurers to request the extension within 10 days  
             of the audit due date.

          7. Corrects reference to two non-existent sections in the  
             Insurance Code to accurately reference Section 11691,  
             which applies to deposits by workers' compensation  
             insurers.
           
          8. Corrects an obsolete reference to law that 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.
           
          9. Allows domestic incorporated insurers to invest in  
             credit unions to the extent the accounts are insured by  
             an agency or instrumentality of the federal government.
           
          10.Limits the percentage of excess funds investments that  
             can be made in a loan or any other obligation to any one  
             borrower or obligor, including all affiliates, to 10  
             percent of the capital stock and surplus or one percent  
             of the admitted assets of the lending insurer, whichever  
             amount is greater.
            
           11.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.  This applies  
             to automobile liability insurance, automobile collision  
             coverage, and automobile physical damage coverage.

          12.Requires insurers to give the IC advanced notification  
             of its intent to enter into tax sharing agreements.







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          13.Authorizes fraternal benefit societies to use mortality  
             tables approved by bulletin (not just through  
             regulations) issued by the IC for purposes of  
             determining actuary values.

          14.Provides that if an enforcement action against a  
             licensee is withdrawn, then each pleading, document, or  
             order against that licensee shall be removed from the  
             Department of Insurance (CDI) web site within 30 days of  
             the withdrawal.  If a matter involves multiple licensees  
             and the CDI withdraws all allegations against one or  
             more of the licensees, the CDI will be required to post  
             , on its Internet website, a statement in the previously  
             posted pleading, document, or order that clarifies that  
             the action has been withdrawn.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  8/17/09)

          Department of Insurance (source)
          America's Health Insurance Plans


           ASSEMBLY FLOOR : 
          AYES:  Adams, Ammiano, Arambula, Beall, Bill Berryhill, Tom  
            Berryhill, Blakeslee, Block, Blumenfield, Brownley,  
            Buchanan, Caballero, Charles Calderon, Carter, Chesbro,  
            Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,  
            Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,  
            Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,  
            Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,  
            Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu,  
            Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,  
            Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel  
            Perez, Portantino, Price, Ruskin, Salas, Saldana, Silva,  
            Skinner, Smyth, Solorio, Audra Strickland, Swanson,  
            Torres, Torrico, Tran, Villines, Yamada, Bass
          NOES:  Anderson
          NO VOTE RECORDED:  Torlakson









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          JJA:mw  8/17/09   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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