BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 1408
                                                                  Page  1

          Date of Hearing:   August 4, 2010

                                Felipe Fuentes, Chair

              SB 1408 (Committee on Banking, Finance and Insurance) - As  
                              Amended:  August 2, 2010 

          Policy Committee:                             Insurance  

          Urgency:     Yes                  State Mandated Local Program:  
          No     Reimbursable:              


          This bill updates laws governing the California Life and Health  
          Insurance Guaranty Association (Association) by addressing key  
          features of the 2009 National Association of Insurance  
          Commissioners Life and Health Insurance Guaranty Association  
          Model Act. Specifically, this bill: 

          1)Increases the coverage limit for death benefits from life  
            insurance policies from $250,000 to $300,000. Increases the  
            coverage limit for annuities and structured settlements from  
            $100,000 to $250,000.

          2)Increases the amount that insurers can be assessed to fund the  
            obligations of the Association from 1% to 2% of premiums.

          3)Repeals the $250 cap on non-pro-rata assessments that are used  
            to fund administrative activities of the Association, and  
            instead authorizes the Association's Board to determine the  
            proper assessment.

          4)Authorizes the Insurance Commissioner to carry out the  
            functions of the Association if the Association fails to carry  
            out its duties.

          5)Contains several other substantive and technical updates to  
            laws governing the Association. 
          FISCAL EFFECT  

          No direct fiscal impact to the California Department of  


                                                                  SB 1408
                                                                  Page  2

          Insurance to continue oversight of the Association. 


           1)Rationale  . This urgency measure is sponsored by the California  
            Life and Health Insurance Guarantee Association. This bill  
            updates California law to conform to recent related  
            recommendations of the National Association of Insurance  
            Commissioners. Recent amendments clarify the higher benefits  
            and new procedures established by this bill apply only to  
            insurance company insolvencies occurring after the effective  
            date of the bill. 

           2)Background  . The Association is composed of all insurers  
            licensed to sell life insurance, health insurance, and  
            annuities in the state of California. In the event a member  
            insurer is found to be insolvent and is ordered to be  
            liquidated by a court, the Guarantee Association Act enables  
            the Association to provide protection to policy holders of  
            life and health insurance policies, and annuity contracts,  
            with the insolvent insurer.

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