BILL ANALYSIS AB 2327 Page 1 Date of Hearing: May 19, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 2327 (Harkey) - As Amended: May 4, 2010 Policy Committee: Insurance Vote:11-0 Housing & Community Development 7-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill creates a framework by which private affordable housing entities are able to join a multi-state risk pool for the purposes of procuring liability coverage. Specifically, this bill: 1)Defines affordable housing. 2)Establishes financial requirements for the risk pooling. 3)Specifies these risk pooling arrangements are not insurance and not subject to regulation by the California Department of Insurance. 4)Requires any pool established pursuant to this bill to furnish a copy of the pool's annual audited financial statement to the California Secretary of State within 180 days of the close of the pool's fiscal year. FISCAL EFFECT Unknown, likely absorbable workload to the California Secretary of State to review pool annual audited financial information. COMMENTS 1)Rationale . This bill is sponsored by the Housing Authorities Risk Retention Pool, a self-insurance pool of 90 public housing authorities from California, Oregon, Washington, and Nevada. This bill broadens definitions and requirements to authorize non-public housing authorities to enter into risk pooling arrangements for the provision of tort, employee AB 2327 Page 2 injury, board member, and physical property liability coverage. 2)Recommended Amendment . This bill was recently amended to provide information to a California-based entity because the risk pool addressed by this bill may be administered from outside of California and the bill prohibits regulation of the risk pool by the California Department of Insurance. Committee staff recommends annual audited financial statements be submitted to the Assembly Housing and Community Development Committee and the Senate Transportation and Housing Committee, rather than the Secretary of State. 3) Background . The Housing Authority Risk Retention Pool (HARRP) was established in 1987 as a response to rapidly escalating insurance costs. The mission of HARRP is to pool risk associated with housing authorities administered by public agencies and to provide claims administration, risk management, financial services, and underwriting in-house. HARRP insures its members for $2 million for each liability and property loss. Excess coverage is purchased in the commercial insurance market. This bill enables private affordable housing entities to join HARRP to take advantage of the risk pooling arrangements and services. Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081