BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1407|
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                                    CONSENT


          Bill No:  SB 1407
          Author:   Senate Banking, Finance and Insurance Committee
          Amended:  4/12/10
          Vote:     21

           
           SENATE BANKING, FINANCE, AND INS. COMMITTEE  :  9-0, 4/21/10
          AYES:  Calderon, Cogdill, Correa, Florez, Kehoe, Lowenthal,  
            Padilla, Price, Runner
          NO VOTE RECORDED:  Cox, Liu

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8


           SUBJECT  :    State Compensation Insurance Fund

           SOURCE  :     State Compensation Insurance Fund


           DIGEST  :    This bill provides that the State Compensation  
          Insurance Fund may invest its excess funds in a manner  
          similar to private insurance carriers, subject to specified  
          exceptions.

           ANALYSIS  :    

          Existing law:

          1. Provides that liability for an injured worker covered  
             under the workers' compensation system is determined  
             "irrespective of the fault of any party".

          2. Specifies that coverage is based on defined employment  
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             relationships so every employer in California must  
             either carry workers' compensation insurance or obtain a  
             certificate of self-insurance.

          3. Authorizes insurance to be obtained privately, through  
             private insurance carriers licensed and admitted to  
             provide workers' compensation insurance in California or  
             through the state's own insurance fund, the State  
             Compensation Insurance Fund (SCIF), a quasi-governmental  
             entity.

          4. Provides that as an insurance provider, SCIF is  
             administered by an independent board of directors for  
             the purpose of providing workers compensation insurance.

          5. Specifies that all moneys that are in excess of SCIF's  
             current requirements can "be invested and reinvested,  
             from time to time, in the same manner as provided for  
             private insurance carriers" pursuant to specified  
             provisions of law.

          6. Authorizes private insurance carriers, other than SCIF,  
             a broad variety of specific investment categories which  
             are allowed for making excess fund investments.

          This bill:

          1. Authorizes SCIF to invest its excess monies under the  
             Excess Funds Investment law applicable to private  
             insurance carriers subject, however, to withholding  
             investment authorization by SCIF in the following  
             classes of investment:

             A.    Investments in corporate stock (Section 1191 of  
                the Insurance Code [INS]).

             B.    Exchange traded call options on common stock (INS  
                Section 1191.1).

             C.    Call options on interest-bearing federal home loan  
                securities (INS Section 1191.5).

             D.    Loans secured by first liens on unencumbered  
                leaseholds (INS Section 1192.2).







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             E.    Investments in Canadian corporations(INS Section  
                1192.4).

             F.    Investments in mortgages or mortgage-backed  
                securities (INS Section 1192.6).

             G.    Investments in  participation certificates in  
                interest-bearing corporate debt (INS Section 1192.7).

             H.    Shares in an investment company specified in the  
                Federal Investment Company Act of 1940 (INS Section  
                1192.9).

             I.    Investment in investment pools and cash management  
                pools (INS Section 1192.95 ).

             J.    Securities of an unaffiliated business entity (INS  
                Section 1192.10 ).

             K.    Federal home loan bank stock (INS Section 1194.7).

             L.    Investments in real estate and leases (INS Section  
                1194.8).

             M.    Notes or bonds secured by a mortgage or other  
                first lien on unencumbered real property (INS Section  
                1194.81).

             N.    Notes or bonds secured by a mortgage or other  
                second lien on encumbered real property (INS Section  
                1194.82).

             O.    Corporate stock (INS Section 1198).

             P.    Corporate stock of a single corporation (INS  
                Section 1199).

           Prior and Related Legislation  

          AB 616 (Ellis), Chapter 738, Statutes of 1979, enacted the  
          SCIF investment statute which SB 1407 modifies.  The  
          Legislative Counsel Digest of the 1979 bill stated that  
          "Existing law provides that excess fund monies (of SCIF)  







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          may be invested in securities authorized for investments by  
          savings banks.  This bill would instead permit the fund to  
          invest such excess funds in the same manner provided for  
          private insurance carriers."

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

           SUPPORT  :   (Verified  5/4/10)

          State Compensation Insurance Fund (source)


           ARGUMENTS IN SUPPORT  :    According to SCIF, the bill's  
          sponsor, this bill will align the language of the SCIF law  
          with the understanding that has prevailed since 1980 that  
          its authority to invest excess funds is generally like that  
          of private insurance carriers and other state workers'  
          compensation funds.


          JJA:mw  5/4/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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