BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2781
                                                                  Page  1

          Date of Hearing:   May 5, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

             AB 2781 (Committee on Insurance) - As Introduced:  March 3,  
                                        2010 

          Policy Committee:                               
          InsuranceVote:12-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill extends the sunset date for California Insurance  
          Guarantee Association (CIGA) authority to issue bonds for the  
          purpose of covering workers' compensation reinsurance claims  
          from January 1, 2011 to January 1, 2013.

           FISCAL EFFECT  

          No direct fiscal impact. CIGA, fully funded by private workers'  
          compensation premiums, will likely not use the authority created  
          by the bill. 

           COMMENTS  
           
          1)Rationale.   This bill extends CIGA bond authority created by  
            workers' compensation reforms contained in AB 227 (Vargas)  
            Chapter 635, Statutes of 2003, which authorized the sale of up  
            to $1.5 billion in bonds to raise the needed funds to continue  
            to pay and discharge worker's compensation claims. 

           2)Background  . All California employers must provide workers'  
            compensation benefits to their employees under state labor  
            law. Employers must purchase workers' compensation insurance  
            from either a licensed insurance company or the State  
            Compensation Insurance Fund (SCIF) or employers may choose to  
            self-insure, which means they use a "pay-as-you go" model,  
            paying benefits to and on behalf of workers as the costs are  
            incurred.   

          When purchasing coverage from a private insurance company, a  








                                                                  AB 2781
                                                                  Page  2

            surcharge is embedded in the premium to include CIGA coverage,  
            which protects the insured in cases when an insurance company  
            becomes insolvent. CIGA provides a mechanism of coverage for  
            paying claims of insolvent insurance companies.

           3)Related Legislation  . AB 3055 (Committee on Insurance), Chapter  
            80, Statutes of 2008 extended the sunset of AB 227. AB 227  
            established the original bond authority addressed in AB 2781.

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081