BILL ANALYSIS Ó
AB 480
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 480 (Solorio)
As Amended August 21, 2012
Majority vote
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|ASSEMBLY: |70-0 |(May 12, 2011) |SENATE: |35-0 |(August 23, |
| | | | | |2012) |
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Original Committee Reference: INS.
SUMMARY : Requires the Department of Resources, Recycling, and
Recovery (DRRR) to accept the use of a captive insurer for up to
50% of the financial assurance required of an operator of a
solid waste landfill.
The Senate amendments:
1)Require DRRR to accept the use of a captive insurer as a means
to satisfy the closure and post-closure financial
responsibility requirements imposed on an owner of a solid
waste landfill.
2)Limit the use of captive insurance to 50% of the overall
financial responsibility required of the owner.
3)Require any owner that uses captive insurance to pay for a
study that evaluates the efficacy of this financial
responsibility method.
4)Conform the statute to the recently enacted federal Dodd-Frank
financial services reform law.
5)Adopt a sunset date of January 1, 2017, for the provisions
mandating that DRRR accept this form of financial
responsibility.
EXISTING LAW :
1)Provides that the financial responsibility of a landfill owner
for closure and post-closure obligations may be satisfied by a
variety of mechanisms, including captive insurance.
2)Provides by operation of DRRR regulations that captive
AB 480
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insurance is not acceptable.
AS PASSED BY THE ASSEMBLY , this bill provided that nothing in
the Insurance Code prevents a captive insurer, as defined, from
satisfying a financial responsibility obligation established by
the provisions of some other Code.
FISCAL EFFECT : According to the Senate Appropriations
Committee, unknown one-time costs, possibly in the high tens of
thousands or hundreds of thousands of dollars, from the
Integrated Waste Management Account (special fund) beginning in
2013-14 for a study and possible audit on holders of captive
insurance.
COMMENTS : This bill was introduced to attempt to address a
regulation that was adopted by the California Integrated Waste
Management Board, and its successor state agency DRRR, that
appears to conflict with express statutory authorization
allowing the use of certain captive insurers for the closure and
post-closure financial assurance requirements of landfill
operators. The regulation, California Code of Regulations,
Title 27, Section 22248, appears to ignore the express terms of
Public Resources Code Section 43601 by imposing an impossible
condition on the use of captive insurers. Specifically, under
the Department of Insurance rules, a captive insurer cannot be
placed on the list of eligible surplus line insurers, yet the
regulation mandates that the captive insurer be on the list.
While DRRR is responsible for regular landfills, the Department
of Toxic Substances Control (DTSC) regulates hazardous materials
landfills. Under the DTSC's rules, captive insurers are
eligible to provide closure and post-closure financial
assurance, and there are currently policies in force in
California by captive insurers providing closure and
post-closure financial assurance for hazardous materials
landfills.
AB 715 (Figueroa), Chapter 978, Statutes of 1998, enacted the
rules governing captive insurance and landfills. The express
purpose of AB 715 was to overcome a pre-existing regulation that
precluded use of the captive insurer mechanism. Relying on
federal law that authorizes use of a captive insurer for these
purposes, AB 715 built on the federal requirements and added
additional financial safeguards beyond the federal law's
requirements.
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In 2006-2007, the federal Environmental Protection Agency
undertook a re-examination of the various financial mechanisms
that it authorizes for satisfaction of closure and post-closure
financial assurance obligations. After that examination, it was
reaffirmed that both captive and commercial insurers should be
treated equally for these purposes, provided that the captive
insurer meets certain regulatory requirements (such as the
regulatory requirements in Vermont, where most captive insurers
are domiciled). It is widely accepted that commercial insurance
is not available in the market.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0005090