BILL NUMBER: AB 2303 INTRODUCED
BILL TEXT
INTRODUCED BY Committee on Insurance (Solorio (Chair), Bradford,
Carter, Feuer, Hayashi, Torres, and Wieckowski)
FEBRUARY 24, 2012
An act to amend Sections 100, 661, 700.04, 923.6, 985, 1011, 1012,
1016, 1022, 1061, 1063, 1070.6, 1851, 1864, 12100, and 12962 of, to
add Section 1011.1 to, to repeal Sections 117 and 12961 of, and to
repeal Chapter 2 (commencing with Section 12420) of Part 6 of
Division 2 of, the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2303, as introduced, Committee on Insurance. Insurance omnibus.
(1) Existing law regulates mortgage insurance and defines it as
including guaranteeing of the payment of the principal, interest, and
other sums agreed to be paid under the terms of any note or bond
secured by mortgage, or other sums secured under the terms of the
mortgage, in its entirety, or of any undivided or other partial
interest in the mortgage, or in a group of mortgages, and the
guaranteeing or insuring, directly or indirectly, against loss
thereon.
This bill would prohibit mortgage insurance from being an
insurance product that may be offered in this state.
(2) Existing law requires the Insurance Commissioner to publish
notices of insurer liquidation in a newspaper of general circulation,
published in the county in which the proceeding is pending, and in
the Counties of Alameda, Los Angeles, Sacramento, San Diego, San
Francisco, and Santa Clara, not less than once a week for 4
successive weeks.
This bill would delete the requirement of publication in certain
cities and counties for the required period of time, and instead
would require only publication in geographic areas pertinent to the
liquidation and that the publication reference a source, either the
liquidated company's or the liquidator's Internet Web site, where
ongoing information for creditors would be provided.
Existing law authorizes the commissioner to apply by verified
application for an order for the liquidation of a domestic
corporation in the insurance business.
This bill would incorporate the federal Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 by authorizing the Federal
Deposit Insurance Corporation to stand in the place of the
commissioner and file a verified application in state court to place
the insurer into liquidation under the laws and requirements of the
state.
(3) Existing law requires that on or before May 1 of each year,
insurers, engaged in writing child care liability insurance coverage,
submit a report to the commissioner of their operations regarding
child care liability claims experience for the preceding calendar
year ending on December 31 on a form furnished by the commissioner.
The commissioner is required to annually report to the Governor,
Legislature, and to the Assembly and Senate Committees on Insurance
regarding certain court actions, such as medical malpractice, and
child care liability claims.
This bill would delete the requirement of that the insurer child
care liability claims experience report for the preceding calendar
year ending on December 31 be submitted to the commissioner on or
before May 1 of each year, and would instead require that the report
for the preceding calendar year be submitted at the request of the
commissioner, but not more than annually, on a form prescribed by the
commissioner. The bill would also delete the commissioner's reports
to the Governor, Legislature, and to the Assembly and Senate
Committees on Insurance described above.
(4) The bill would also make conforming changes and delete
obsolete provisions.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 100 of the Insurance Code is amended to read:
100. Insurance in this state is divided into the following
classes:
(1) Life
(2) Fire
(3) Marine
(4) Title
(5) Surety
(6) Disability
(7) Plate glass
(8) Liability
(9) Workmen's compensation
(10) Common carrier liability
(11) Boiler and machinery
(12) Burglary
(13) Credit
(14) Sprinkler
(15) Team and vehicle
(16) Automobile
(17) Mortgage Reserved ]
(18) Aircraft
(19) Mortgage guaranty
(19.5) Insolvency
(19.6) Legal insurance
(20) Miscellaneous
SEC. 2. Section 117 of the Insurance Code is repealed.
117. Mortgage insurance includes the guaranteeing of the payment
of the principal, interest and other sums agreed to be paid under the
terms of any note or bond secured by mortgage, or other sums secured
under the terms of any such mortgage, in its entirety, or of any
undivided or other partial interest in any such mortgage, or in a
group of such mortgages, and the guaranteeing or insuring, directly
or indirectly, against loss thereon.
SEC. 3. Section 661 of the Insurance Code is amended to read:
661. (a) A notice of cancellation of a policy shall be effective
only if it is based on one or more of the following reasons:
(1) Nonpayment of premium.
(2) The driver's license or motor vehicle registration of the
named insured or of any other operator who either resides in the same
household or customarily operates an automobile insured under the
policy has been under suspension or revocation during the policy
period or, if the policy is a renewal, during its policy period or
the 180 days immediately preceding its effective date.
(3) Discovery of fraud by the named insured in pursuing a claim
under the policy provided the insurer does not rescind the policy.
(4) Discovery of material misrepresentation of any of the
following information concerning the named insured or any resident of
the same household who customarily operates an automobile insured
under the policy:
(A) Safety record.
(B) Annual miles driven in prior years.
(C) Number of years of driving experience.
(D) Record of prior automobile insurance claims, if any.
(E) Any other factor found by the commissioner to have a
substantial relationship to the risk of loss.
Any insured who negligently misrepresents information described in
this paragraph may avoid cancellation by furnishing corrected
information to the insurer within 20 days after receiving notice of
cancellation and agreeing to pay any difference in premium for the
policy period in which the information remained undisclosed.
(5) A substantial increase in the hazard insured against.
(b) This section shall not apply to any policy or coverage that
has been in effect less than 60 days at the time notice of
cancellation is mailed or delivered by the insurer unless it is a
renewal policy.
(c)
(b) Modification of automobile physical damage coverage
by the inclusion of a deductible not exceeding one hundred dollars
($100) shall not be deemed a cancellation of the coverage or of the
policy.
(d)
(c) This section shall not apply to nonrenewal.
SEC. 4. Section 700.04 of the Insurance Code is amended to read:
700.04. Paid-in capital for life insurers is governed by Section
10510 of this code; for title insurers by Section 12359 ;
for mortgage insurers by Section 12440 ; and for mortgage
guaranty insurers by Section 12640.03.
SEC. 5. Section 923.6 of the Insurance Code is amended to read:
923.6. (a) Every admitted property and casualty insurer, unless
otherwise exempted by the domiciliary commissioner, shall annually
submit the opinion of an Appointed Actuary entitled "Statement of
Actuarial Opinion." This opinion shall be filed in accordance with
the appropriate Property and Casualty Annual Statement Instructions
of the National Association of Insurance Commissioners (NAIC).
(1) For purposes of this section, the term, "property and casualty
insurer" means any admitted insurer writing insurance as described
in Section 102, 103, 105, 107, 108, 109, 110, 111, 112, 113, 114,
115, 116 , 117 , 118, 119, 119.6, 120, 124, or
124.5.
(2) For purposes of this section, the following terms have the
same meaning as used in the Property and Casualty Annual Statement
Instructions of the NAIC:
(A) Actuarial Opinion.
(B) Actuarial Opinion Summary.
(C) Actuarial Report.
(D) Appointed Actuary.
(E) Statement of Actuarial Opinion.
(F) Property and Casualty Annual Statement Instructions.
(3) The commissioner may adopt regulations related to the terms
and conditions required by the Property and Casualty Annual Statement
Instructions of the NAIC.
(b) Every property and casualty insurer domiciled in this state
that is required to submit a Statement of Actuarial Opinion shall
annually submit an Actuarial Opinion Summary, written by the insurer'
s Appointed Actuary. This Actuarial Opinion Summary shall be filed in
accordance with the appropriate Property and Casualty Annual
Statement Instructions of the NAIC and shall be considered as a
document supporting the Actuarial Opinion required in subdivision
(a).
(c) An admitted insurer not domiciled in this state shall provide
the Actuarial Opinion Summary upon request of the commissioner.
(d) An Actuarial Report and underlying workpapers as required by
the appropriate Property and Casualty Annual Statement Instructions
of the NAIC shall be prepared to support each Actuarial Opinion. If
an insurer fails to provide either a supporting Actuarial Report or
workpapers at the request of the commissioner, or if the commissioner
determines that the supporting Actuarial Report or workpapers
provided by the insurer are otherwise unacceptable to the
commissioner, the commissioner may engage a qualified actuary at the
expense of the insurer to review the opinion and the basis for the
opinion and prepare the supporting Actuarial Report or workpapers.
(e) Notwithstanding subdivision (d) of Section 6254 of the
Government Code, subdivision (f), or any other provision of law, the
Statement of Actuarial Opinion required by subdivision (a) shall be a
public record and open to inspection.
(f) (1) Documents, materials, or other information in the
possession or control of the commissioner that are considered an
Actuarial Report, workpapers, or Actuarial Opinion Summary provided
in support of the Statement of Actuarial Opinion, and any other
material provided by the insurer to the commissioner in connection
with the Actuarial Report, workpapers, or Actuarial Opinion Summary
shall be confidential by law and privileged, shall not be made public
by the commissioner or any other person and are exempt from the
California Public Records Act (Chapter 3.5 (commencing with Section
6250) of Division 7 of Title 1 of the Government Code), shall not be
subject to subpoena, and shall not be subject to discovery or
admissible in evidence in any civil action brought by a private
party.
(2) This subdivision shall not limit the commissioner's authority
to release the documents, materials, and other information described
in paragraph (1) to the American Academy of Actuaries' Actuarial
Board for Counseling and Discipline (ABCD), or its successor, so long
as those documents, materials, and other information are required
for the purpose of professional disciplinary proceedings, and the
ABCD establishes procedures satisfactory to the commissioner for
preserving the confidentiality of the documents, nor shall this
subdivision limit the commissioner's authority to use those
documents, materials, or other information in furtherance of any
regulatory or legal action brought as part of the commissioner's
official duties.
(3) The commissioner may also exercise, with respect to the
documents, materials, or other information described in paragraph
(1), all the authority specified in subdivision (b) of Section 735.5,
or any successor provision.
SEC. 6. Section 985 of the Insurance Code is amended to read:
985. (a) On or after January 1, 1970, as used in this article and
in paragraph (9) of subdivision (i)
(a) of Section 1011, "insolvency" means either of the
following:
(1) Any impairment of minimum "paid-in capital" or "capital paid
in," as defined in Section 36, required in the aggregate of an
insurer by the provisions of this code for the class, or classes, of
insurance that it transacts anywhere.
(2) An inability of the insurer to meet its financial obligations
when they are due.
(b) On or after January 1, 1970, an insurer cannot escape the
condition of insolvency by being able to provide for all its
liabilities and for reinsurance of all outstanding risks. An insurer
must also be possessed of additional assets equivalent to
such the aggregate "paid-in capital" or "capital
paid in" required by this code after making provision for all
such those liabilities and for
such that reinsurance.
(c) On or after October 1, 1967, as used in this code provision
for reinsurance of all outstanding risks and "gross premiums without
any deduction, received and receivable upon all unexpired risks"
means the greater of: (1) the aggregate amount of actual unearned
premiums, or (2) the amount reasonably estimated as being required to
reinsure in a solvent admitted insurer the unexpired terms of the
risks represented by all outstanding policies.
(d) On or after October 1, 1967, an insurer must
shall make provision for reinsurance of the
outstanding risk on policies that provide premiums are fully earned
at inception and on policies that for any other reason do not provide
for a return premium to the insured on cancellation prior to
expiration.
(e) On or after October 1, 1967, the commissioner shall prescribe
standards for reasonably estimating the amount required to reinsure
that will provide adequate safeguards for the policyholders,
creditors , and the public.
(f) On or after October 1, 1967, this section shall not be
applicable to life, title, mortgage , or mortgage guaranty
insurers.
(g) In the application of this section to disability insurance, as
defined in Section 106, reserves for unearned premiums and amounts
reasonably estimated as required to reinsure outstanding risks shall
be determined in accordance with the provisions of Section 997.
SEC. 7. Section 1011 of the Insurance Code is amended to read:
1011. (a) The superior court of the county
in which the principal office of a person described in Section 1010
is located shall , upon the filing by the
commissioner of the verified application showing any of the
following conditions hereinafter enumerated to
in this subdivision exist, or a filing by
the Federal Deposit Insurance Corporation of the verified application
showing that the conditions enumerated in subdivision (b) exist and
the conditions set forth in Section 5383(e)(3) of Title 12 of the
United States Code having been satisfied, shall issue its order
vesting title to all of the assets of that person, wheresoever
situated, in the commissioner or his or her successor in office, in
his or her official capacity as such ,
and direct the commissioner forthwith to take possession of all of
its books, records, property, real and personal, and assets, and to
conduct, as conservator, the business of said
the person, or so much thereof as to the commissioner may seem
appropriate, and enjoining said the
person and its officers, directors, agents, servants, and employees
from the transaction of its business or disposition of its property
until the any of the following further
order of said the court:
(a)
(1) That such the person
has refused to submit its books, papers, accounts, or affairs to the
reasonable inspection of the commissioner or his or her deputy or
examiner.
(b)
(2) That such the person
has neglected or refused to observe an order of the commissioner to
make good within the time prescribed by law any deficiency in its
capital if it is a stock corporation, or in its reserve if it is a
mutual insurer.
(c)
(3) That such the person,
without first obtaining the consent in writing of the commissioner,
has transferred, or attempted to transfer, substantially its entire
property or business or, without such consent, has
entered into any transaction the effect of which is to merge,
consolidate, or reinsure substantially its entire property or
business in or with the property or business of any other person.
(d)
(4) That such the person
is found, after an examination, to be in such condition that its
further transaction of business will be hazardous to its
policyholders, or creditors, or to the public.
(e)
(5) That such the person
has violated its charter or any law of the state.
(f)
(6) That any officer of such
the person refuses to be examined under oath, touching its
affairs.
(g)
(7) That any officer or attorney in fact of
such the person has embezzled, sequestered, or
wrongfully diverted any of the assets of such
the person.
(h)
(8) That a domestic insurer does not comply with the
requirements for the issuance to it of a certificate of authority, or
that its certificate of authority has been revoked ; or
.
(i)
(9) That the last report of examination of any person
to whom the provisions of this article apply shows such
the person to be insolvent within the meaning of
Article 13 (commencing with Section 980), Chapter 1, Part 2,
Division 1; or if a reciprocal or interinsurance exchange, within the
applicable provisions of Section 1370.2, 1370.4, 1371, or 1372; or
if a life insurer, within the applicable provisions of Sections 10510
and 10511.
(b) Notification is given by the United States Secretary of the
Treasury that a determination has been made by the secretary, in
accordance with and satisfying the provisions of Section 5383(b) of
Title 12 of the United States Code, as to a person described in
Section 1010 that is an insurance company as defined in Section 5381
(a)(13) of Title 12 of the United States Code, and one of the
following:
(1) The board of directors, or body performing similar functions,
of the person acquiesces or consents to the appointment of a receiver
as provided for in Section 5832(a)(1)(A)(i) of Title 12 of the
United States Code, with that consent to be considered to be consent
to issuance of an order under this section.
(2) The United States District Court for the District of Columbia
issued an order for the appointment of a receiver of the person as
provided for in Section 5382(a)(1)(A)(iv)(I) of Title 12 of the
United States Code, without regard to whether an appeal of the order
is pending.
(3) A petition by the United States Secretary of the Treasury for
appointment of a receiver was made to the United States District
Court for the District of Columbia and was granted by operation of
the law as provided for in Section 5382(a)(1)(A)(v) of Title 12 of
the United States Code, without regard to whether an appeal of the
order is pending.
SEC. 8. Section 1011.1 is added to the Insurance Code, to read:
1011.1. If a verified application is filed pursuant to Section
1011 that shows that the conditions set forth in subdivision (b) of
Section 1011 exist and upon a showing that notice was provided to the
person that is the subject of the verification application, all of
the following apply:
(a) A superior court hearing shall be held in which the person may
oppose the verified application solely on the grounds that the
conditions set forth in subdivision (b) of Section 1101 do not exist.
The hearing shall be completed within 24 hours after the verified
application is filed with the court.
(b) The superior court shall issue an order as provided for in
Section 1011 within 24-hours after the verified application was filed
with the court.
(c) If the superior court does not issue an order within 24 hours
as provided for in subdivision (b), then an order described in
subdivision (a) of Section 1011 shall be deemed granted by operation
of law upon expiration of the 24-hour period, without further notice.
(d) An order entered by the superior court pursuant to subdivision
(b) or entered by operation of law pursuant to subdivision (c) shall
not be subject to any stay or injunction pending appeal.
SEC. 9. Section 1012 of the Insurance Code is amended to read:
1012. Said Except in the case of an order
issued based on a ve rified application showing the
conditions in subdivision (b) of Section 1011 to exist, the
order shall continue in force and effect until, on the application
either of the commissioner or of such that
person, it shall, after a full hearing, appear to said
the court that the ground for said
the order directing the commissioner to take
title and possession does not exist or has been removed and that
said the person can properly resume
title and possession of its property and the conduct of its business.
SEC. 10. Section 1016 of the Insurance Code is amended to read:
1016. (a) If at any time after the issuance
of an order under section Section
1011, or if at the time of instituting any proceeding under this
article, including under Section 1011, it shall appear to
the commissioner that it would be futile to proceed as conservator
with the conduct of the business of such that
person, he or she may apply to the court for an
order to liquidate and wind up the business of said
the person. Upon a full hearing of such
that application, the court may make an order
directing the winding up and liquidation of the business of
such that person by the commissioner, as
liquidator, for the purpose of carrying out the order to liquidate
and wind up the business of such that
person.
(b) Notwithstanding subdivision (a), the court may issue an order
to liquidate and wind up the business of a person as to whom a
verified application is filed pursuant to subdivision (b) of Section
1011 based solely on the verified application and hearing as provided
for in subdivision (a) of Section 1011.1, without further hearing,
or may issue an order to liquidate and wind up the business of the
person upon application by the commissioner after the issuance of an
order under Section 1011. The court's order may direct the winding up
and liquidation of the business of the person by the commissioner,
as liquidator, for the purpose of carrying out the order to liquidate
and wind up the business of the person.
SEC. 11. Section 1022 of the Insurance Code is amended to read:
1022. Such The notice shall be
published in a newspaper newspapers of
general circulation , published in the county in which the
proceeding is pending, and in the Counties of Alameda, Los Angeles,
Sacramento, San Diego, San Francisco, and Santa Clara, not less than
once a week for four successive weeks in geographic
areas pertinent to the liquidation. The notice shall reference a
source, either the liquidated company's or the liquidator's Internet
Web site, where ongoing information for creditors shall be provided
. A copy of the notice, accompanied by an affidavit of due
publication, including a statement of the date of first
publication, shall be filed with the clerk of the court.
SEC. 12. Section 1061 of the Insurance Code is amended to read:
1061. In verification of the matters set forth in Section 1060 of
this code, the Department of Finance shall, at least every two years
or more often if requested by the commissioner, examine the
commissioner's books and accounts relating to all proceedings under
this article and Article 8 (commencing with Section 12550),
Chapter 2, Part 6, Division 2 of this code , and shall file
a report of each such examination with the court
in which the respective proceeding is pending and shall furnish the
commissioner a certified copy of each such report.
The expense of examining the books and accounts of the commissioner
as conservator or liquidator under this article or under
Article 8 (commencing with Section 12550), Chapter 2, Part 6 of
Division 2 of this code shall be paid out of the support
appropriation for the Department of Insurance current at the date of
billing for such the expense and shall,
upon order of the court or courts before which the proceedings under
said the articles are pending, be
ratably reimbursed to such that
appropriation out of the assets of the estates administered by the
commissioner as conservator or liquidator under this article
or under Article 8 (commencing with Section 12550), Chapter 2, Part
6 of Division 2 of this code .
SEC. 13. Section 1063 of the Insurance Code is amended to read:
1063. (a) Within 60 days after the original effective date of
this article, all insurers, including reciprocal insurers, admitted
to transact insurance in this state of any or all of the following
classes only in accordance with the provisions of Chapter 1
(commencing with Section 100) of Part 1 of this division: fire (see
Section 102), marine (see Section 103), plate glass (see Section
107), liability (see Section 108), workers' compensation (see Section
109), common carrier liability (see Section 110), boiler and
machinery (see Section 111), burglary (see Section 112), sprinkler
(see Section 114), team and vehicle (see Section 115), automobile
(see Section 116), aircraft (see Section 118), and miscellaneous (see
Section 120), shall establish the California Insurance Guarantee
Association (the association); provided, however, this article shall
not apply to the following classes or kinds of insurance: life and
annuity (see Section 101), title (see Section 104), fidelity or
surety including fidelity or surety bonds, or any other bonding
obligations (see Section 105), disability or health (see Section
106), credit (see Section 113), mortgage (see Section 117),
mortgage guaranty, insolvency or legal (see Section 119),
financial guaranty or other forms of insurance offering protection
against investment risks (see Section 124), the ocean marine portion
of any marine insurance or ocean marine coverage under any insurance
policy including the following: the Jones Act (46 U.S.C. Sec. 688),
the Longshore and Harbor Workers' Compensation Act (33 U.S.C. Sec.
901 et seq.), or any other similar federal statutory enactment, or
any endorsement or policy affording protection and indemnity
coverage, or reinsurance as defined in Section 620, or fraternal fire
insurance written by associations organized and operating under
Sections 9080 to 9103, inclusive. Any insurer admitted to transact
only those classes or kinds of insurance excluded from this article
shall not be a member insurer of the association. Each insurer
admitted to transact a class of insurance included in this article,
including the State Compensation Insurance Fund, as a condition of
its authority to transact insurance in this state, shall participate
in the association whether established voluntarily or by order of the
commissioner after the elapse of 60 days following the original
effective date of this article in accordance with rules to be
established as provided in this article. It shall be the purpose of
the association to provide for each member insurer insolvency
insurance as defined in Section 119.5.
(b) The association shall be managed by a board of governors,
composed of nine member insurers, each of which shall be appointed by
the commissioner to serve initially for terms of one, two, or three
years and thereafter for three-year terms so that three terms shall
expire each year on December 31, and shall continue in office until
his or her successor shall be appointed and qualified. At least five
members of the board shall be domestic insurers. At least three of
the members shall be stock insurers, and at least three shall be
nonstock insurers. The nine members shall be representative, as
nearly as possible, of the classes of insurance and of the kinds of
insurers covered by this article. In case of a vacancy for any reason
on the board, the commissioner shall appoint a member insurer to
fill the unexpired term. In addition to the nine member insurers, the
membership of the board shall also include one public member
appointed by the President pro Tempore of the Senate, one public
member appointed by the Speaker of the Assembly, one business member
appointed by the commissioner, and one labor member appointed by the
commissioner.
(c) The association shall adopt a plan of operations, and any
amendments thereto, not inconsistent with the provisions of this
article, necessary to assure the fair, reasonable, and equitable
manner of administering the association, and to provide for other
matters as are necessary or advisable to implement the provisions of
this article. The plan of operations and any amendments thereto shall
be subject to prior written approval by the commissioner. All
members of the association shall adhere to the plan of operation.
(d) If for any reason the association fails to adopt a suitable
plan of operation within 90 days following the original effective
date of this article, or if at any time thereafter the association
fails to adopt suitable amendments to the plan of operation, the
commissioner shall after hearing adopt and promulgate reasonable
rules as are necessary or advisable to effectuate the provisions of
this chapter. These rules shall continue in force until modified by
the commissioner after hearing or superseded by a plan of operation,
adopted by the association and approved by the commissioner.
(e) In accordance with its plan of operation, the association may
designate one or more of its members as a servicing facility, but a
member may decline this designation. Each servicing facility shall be
reimbursed by the association for all reasonable expenses it incurs
and for all payments it makes on
behalf of the association. Each servicing facility shall have
authority to perform any functions of the association that the board
of governors lawfully may delegate to it and to do so on behalf of
and in the name of the association. The designation of servicing
facilities shall be subject to the approval of the commissioner.
(f) The association shall have authority to borrow funds when
necessary to effectuate the provisions of this article, and may
provide in its plan of operations for any of the following:
(1) The issuance of notes, bonds, or debentures, or the
establishment of a special purpose trust or other entity, solely for
the purpose of facilitating a financing.
(2) The securing of that borrowing or those notes, bonds, or
debentures by pledging or granting liens or mortgages, or by
otherwise encumbering its real or personal property, including, but
not limited to, premiums levied under Section 1063.5.
(g) The association, either in its own name or through servicing
facilities, may be sued and may use the courts to assert or defend
any rights the association may have by virtue of this article as
reasonably necessary to fully effectuate the provisions thereof.
(h) The association shall have the right to intervene as a party
in any proceeding instituted pursuant to Section 1016 wherein
liquidation of a member insurer as defined in Section 1063.1 is
sought.
(i) (1) The association shall have an annual audit of its
financial condition conducted by an independent certified public
accountant. The audit shall be conducted, to the extent possible, in
accordance with generally accepted auditing standards (GAAS) and the
report of the audit shall be submitted to the commissioner.
(2) The association shall annually audit at least one-third of the
service companies retained by the association to adjust claims of
insolvent insurers. The audits shall (A) assure that all covered
claims are being investigated, adjusted, and paid in accordance with
customary industry standards and practices and all applicable
statutes, rules and regulations, and (B) examine the management and
supervisory systems overseeing the claims functions. The audits shall
be conducted by the association or an independent auditor, provided
that the three largest service companies, as measured by the number
of claims processed for the association during the previous three
fiscal years, shall be audited by an independent auditor at least
once every three years. The association shall implement systems to
retain independent auditing firms for the purpose of this paragraph,
provided that no one firm is designated or utilized as an exclusive
provider. Audits conducted pursuant to this paragraph shall be
submitted annually to the commissioner for review.
(j) The commissioner shall examine the association to the same
extent as, and in accordance with, the requirements of Article 4
(commencing with Section 730) 729) of
Chapter 1 of Part 2 of Division 2, 1,
which sets forth the examination requirements applicable to admitted
insurers. A copy of the examination report shall be filed with the
Chairpersons of the Senate and Assembly Committees on Insurance no
later than December 31 of the year the report is completed.
SEC. 14. Section 1070.6 of the Insurance Code is amended to read:
1070.6. The withdrawal procedure and fees prescribed by this
article shall not be required of a nonsurviving admitted constituent
to a merger or consolidation into another admitted insurer in
accordance with the applicable statutes and the commissioner's prior
written consent given pursuant to paragraph (3) of
subdivision (c) (a) of Section 1011,
provided the commissioner is satisfied by documents, authenticated so
as to be admissible in evidence over objection, filed with him,
that:
(a) Such The constituent has
discharged all of its liabilities to residents of this state in the
manner provided by Section 1071.5;
(b) There will be an admitted insurer directly available to
such the constituent's policyholders:
(1) to obtain policy changes and endorsements, (2) to receive payment
of premiums and refund unearned premiums, (3) to serve notice of
claim, proof of loss, summons, process, and other papers, and (4) for
purposes of suit;
(c) Such The constituent shall
timely file with the commissioner appropriate financial statements
reporting its insurance business done in this state during the
calendar year of the merger or consolidation and all appropriate tax
returns required by law for such the
period, and shall timely pay all taxes found to be due on account of
such the business; and
(d) Such The constituent
has surrendered its current California certificate of authority to
the commissioner for cancellation as of the effective date of the
merger.
The withdrawal procedure and fees prescribed by this article shall
not be required of an insurer which that
has been liquidated by a final order of a court of record of
this or any sister state provided a certified copy of such
the order reciting the fact of liquidation and
discharge of all obligations has been filed with the commissioner.
SEC. 15. Section 1851 of the Insurance Code is amended to read:
1851. The provisions of this chapter shall apply to all insurance
on risks or on operations in this state, except:
(a) Reinsurance, other than joint reinsurance to the extent stated
in Article 5 (commencing with Section 1856) .
(b) Life insurance.
(c) Insurance of vessels or craft, their cargoes, marine builders'
risks, marine protection and indemnity, or other risks commonly
insured under marine, as distinguished from inland marine, insurance
policies. Inland marine insurance shall be deemed to include
insurance now or hereafter defined by statute, or by interpretation
thereof, or if not so defined or interpreted, by ruling of the
commissioner or as established by general custom of the business, as
inland marine insurance.
(d) Title insurance.
(e) Disability insurance.
(f) Workers' compensation insurance and insurance of any liability
of employers for injuries to, or death of, employees arising out of,
and in the course of, employment when this insurance is incidental
to, and written in connection with, the workers' compensation
insurance issued to the same employer and covering the same employer
interests.
(g) Mortgage insurance.
(h)
(g) Insurance transacted by county mutual fire insurers
or county mutual fire reinsurers.
SEC. 16. Section 1864 of the Insurance Code is amended to read:
1864. (a) On or before May 1 of each year, commencing in
1987, each Each insurer engaged in writing
child care liability insurance coverage in this state shall submit to
the commissioner a report of its operations regarding child care
liability claims experience for the last preceding calendar year
ending on December 31 on a form furnished at
the request of the commissioner, but not more than annually, on a
form prescribed by the commissioner. Each report shall
separately state the following information for family day care homes,
as defined in Section 1596.78 of the Health and Safety Code, and
licensed child care centers, as defined in Section 1596.76 of the
Health and Safety Code:
(1) Premiums earned.
(2) Premiums written.
(3) Number of claims.
(4) Number of new claims during the reporting period.
(5) Number of claims closed during the reporting period.
(6) Number of claims outstanding at the end of the reporting
period.
(7) Total losses incurred.
(8) Total losses incurred as a percentage of premiums earned.
(9) Total number of policies in force on the last day of the
reporting period.
(10) Total number of policies canceled.
(11) Total number of policies nonrenewed.
(12) Net underwriting gain or loss.
(13) Separate allocations of expenses for commissions, other
acquisition costs, general office expenses, taxes, licenses and fees,
and other expenses. The allocations required by this section shall
be made by dividing the company's total premiums earned for child
care liability insurance by its total premiums earned and applying
the ratio determined to the expenses reported in the company's annual
statement filed with the commissioner pursuant to Section 900.
(b) The commissioner shall develop and issue reporting forms to
insurers at least 90 days prior to the due date of the reports
required pursuant to this section.
(c) The Legislature finds that it is in the public interest of the
policyholders of this state that insurers writing child care
liability insurance permit remittance of premiums to occur on an
installment basis.
(d) The information provided under this section pertaining to a
specified claim, insurance policy, or insurer shall be confidential
and shall only be revealed by the department on a nonspecific basis
as part of an aggregate report of claims or policies.
SEC. 17. Section 12100 of the Insurance Code is amended to read:
12100. As used in this article:
(a) (1) "Financial guaranty insurance" means a surety bond, an
insurance policy or, when issued by an insurer, an indemnity contract
and any guarantee similar to the foregoing types, under which loss
is payable upon proof of occurrence of financial loss to an insured
claimant, obligee, or indemnitee as a result of any of the following
events:
(A) Failure of any obligor on or issuer of any debt instrument or
other monetary obligation (including equity securities guaranteed
under a surety bond, insurance policy, or indemnity contract) to pay,
when due to be paid by the obligor or scheduled at the time insured
to be received by the holder of the obligation, principal, interest,
premium, dividend, purchase price of or on the instrument or
obligation, or other monetary payment when the failure is the result
of financial default or insolvency, or, provided that the payment
source is investment grade, any other failure of that payment source
to make payment, regardless of whether the obligation is incurred
directly or as guarantor by or on behalf of another obligor that has
also defaulted.
(B) Changes in the levels of interest rates, whether short or long
term, or the differential in interest rates between various markets
or products.
(C) Changes in the rate of exchange of currency.
(D) Changes in the value of financial or commodity indices, or
price levels in general.
(E) Other events that the commissioner determines by order,
regulation, or written consent are substantially similar to any of
the foregoing.
(2) Notwithstanding paragraph (1), "financial guaranty insurance"
shall not include any of the following:
(A) Insurance of any loss resulting from any event described in
paragraph (1), if the loss is payable only upon the occurrence of any
of the following, as specified in a surety bond, insurance policy,
or indemnity contract:
(i) A fortuitous physical event.
(ii) A failure of or deficiency in the operation of equipment.
(iii) An inability to extract or recover a natural resource.
(B) Title insurance authorized by Section 104 and as permitted to
be written by title insurers pursuant to Chapter 1 (commencing with
Section 12340) of Part 6 of this division .
(C) Surety insurance as authorized by Section 105.
(D) Credit unemployment insurance, meaning insurance on a debtor
in connection with a specific loan or other credit transaction, to
provide payments to a creditor in the event of unemployment of the
debtor for the installments or other periodic payments becoming due
while a debtor is unemployed.
(E) Credit insurance authorized by Section 113.
(F) Guaranteed investment contracts and funding agreements issued
by life insurance companies which that
provide that the life insurer itself will make specified payments in
exchange for specific premiums or contributions.
(G) Mortgage insurance authorized by Section 117 and as permitted
to be written by mortgage insurers pursuant to Chapter 2 (commencing
with Section 12420) of Part 6 of this division.
(H)
(G) Mortgage guaranty insurance authorized by Section
119 and as permitted to be written by a mortgage guaranty insurer
pursuant to Chapter 2A (commencing with Section 12640.01) of Part 6
of this division .
(I)
(H) Indemnity contracts or similar guarantees, to the
extent that they are not otherwise limited or proscribed by this
article, in which a life insurer does any of the following:
(i) Guarantees its obligations or indebtedness or the obligations
or indebtedness of a subsidiary (as defined in Section 1215) other
than a financial guaranty insurance corporation; provided that:
(I) To the extent that any such obligations or
indebtedness are backed by specific assets, those assets shall at all
times be owned by the life insurer or the subsidiary.
(II) In the case of the guarantee of the obligations or
indebtedness of the subsidiary that are not backed by specific assets
of the life insurer, the guarantee terminates once the subsidiary
ceases to be a subsidiary.
(ii) Guarantees obligations or indebtedness (including the
obligation to substitute assets where appropriate) with respect to
specific assets acquired by a life insurer in the course of normal
investment activities and not for the purpose of resale with credit
enhancement, or guarantees obligations or indebtedness acquired by
its subsidiary, provided that the assets acquired pursuant to this
clause have been either of the following:
(I) Acquired by a special purpose entity, whose sole purpose is to
acquire specific assets of the life insurer or the subsidiary and
issue securities or participation certificates backed by the assets.
(II) Sold to an independent third party.
(iii) Guarantees obligations or indebtedness of an employee or
agent of the life insurer.
(J)
(I) Any cramdown bond or mortgage repurchase bond, as
those phrases are used by nationally recognized rating agencies in
respect of mortgage-backed securities.
(K)
(J) Residual value insurance.
(L)
(K) Any other form of insurance covering risks that the
commissioner determines by order, regulation, or written consent to
be substantially similar to any of the foregoing.
(b) "Affiliate" means a person that, directly or indirectly, owns
at least 10 but less than 50 percent of the financial guaranty
insurance corporation or that is at least 10 percent but less than 50
percent, directly or indirectly, owned by a financial guaranty
insurance corporation.
(c) "Asset-backed securities" means either of the following:
(1) Securities or other financial obligations of an issuer
provided that both of the following apply:
(A) The issuer is a special purpose corporation, trust, or other
entity, or, provided that the securities or other financial
obligations constitute an insurable risk, is a bank, trust company,
or other financial institution, deposits in which are insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation or any successors thereto.
(B) The securities or other financial obligations are related to a
pool of assets so that all of the following apply:
(i) The pool of assets has been conveyed, pledged, or otherwise
transferred to or is otherwise owned or acquired by the issuer.
(ii) The pool of assets backs the securities or other financial
obligations issued.
(iii) No asset in the pool, other than an asset directly payable
by, guaranteed by, or backed by the full faith and credit of the
United States government or that otherwise qualifies as collateral
under paragraph (1) or (2) of subdivision (e), has a value exceeding
20 percent of the aggregate value of the pool.
(2) A pool of credit default swaps or credit default swaps
referencing a pool of obligations, provided that each of the
following is true:
(A) The swap counterparty whose obligations are insured under the
credit default swap is a special purpose corporation, special purpose
trust, or other special purpose legal entity.
(B) No reference obligation in the pool, other than an obligation
directly payable by, guaranteed by, or backed by the full faith and
credit of the United States government, or that otherwise qualifies
as collateral under paragraph (2) of subdivision (e), has a notional
amount exceeding 10 percent of the pool's aggregate notional amount.
(C) The insurer has the benefit of a deductible or other first
loss credit protection against claims under its insurance policy.
(d) "Average annual debt service" means the amount of insured
unpaid principal and interest on an obligation multiplied by the
number of the insured obligations (assuming that each obligation
represents a $1,000 par value), divided by the amount equal to the
aggregate life of all of those obligations. This definition,
expressed as a formula in regard to bonds, is as follows:
Total Debt Service 02 Number
Average Annual = of Bonds
Debt Service
Bond Years
Total Debt Insured Unpaid Principal +
Service = Interest
Number of Bonds = Total Insured Principal
$1,000
Bond Years = Number of Bonds 02 Term in Years
Term in Years = Term to maturity based on
scheduled amortization or, in the absence of a
scheduled amortization in the case of asset-backed
securities or other obligations lacking a
scheduled amortization, expected amortization, in
each case determined as of the date of issuance of
the insurance policy based upon the amortization
assumptions employed in pricing the insured
obligations or otherwise used by the insurer to
determine aggregate net liability.
(e) "Collateral" means any of the following:
(1) Cash.
(2) The cashflow from specific obligations which
that are not callable and scheduled to be
received based on expected prepayment speed on or prior to the date
of scheduled debt service (including scheduled redemptions and
prepayments) on the insured obligation, provided that any of the
following is true, as applicable:
(A) The specific obligations are directly payable by, guaranteed
by or backed by the full faith and credit of the United States
government.
(B) In the case of insured obligations denominated or payable in a
foreign currency as permitted under paragraph (3) of subdivision (b)
of Section 12112, the specific obligations are directly payable by,
guaranteed by, or backed by the full faith and credit of the foreign
government or the central bank thereof.
(C) The specific obligations are insured by the same insurer that
insures the obligations being collateralized, and the cashflows from
the specific obligations are sufficient to cover the insured
scheduled payments on the obligations being collateralized.
(3) The market value of investment grade obligations, other than
obligations evidencing an interest in the project or projects
financed with the proceeds of the insured obligations.
(4) The face amount of each letter of credit that meets all of the
following criteria:
(A) Is irrevocable.
(B) Provides for payment under the letter of credit in lieu of or
as reimbursement to the insurer for payment required under a
financial guaranty insurance policy.
(C) Is issued, presentable, and payable either:
(i) At an office of the letter of credit issuer in the United
States.
(ii) At an office of the letter of credit issuer located in the
jurisdiction in which the trustee or paying agent for the insured
obligation is located.
(D) Contains a statement that either:
(i) Identifies the financial guaranty insurance corporation, its
collateral agent, or any successor by operation of law, including any
liquidator, rehabilitator, receiver , or conservator, as
the beneficiary.
(ii) Identifies the trustee or the paying agent for the insured
obligation as the beneficiary.
(E) Contains a statement to the effect that the obligation of the
letter of credit issuer under the letter of credit is an individual
obligation of that issuer and is in no way contingent upon
reimbursement with respect thereto.
(F) Contains an issue date and an expiration date.
(G) Does either of the following:
(i) Has a term at least as long as the shorter of the term of the
insured obligation or the term of the financial guaranty insurance
policy.
(ii) Provides that the letter of credit shall not expire without
30 days prior written notice to the beneficiary and allows for
drawing under the letter of credit in the event that, prior to
expiration, the letter of credit is not renewed or extended or a
substitute letter of credit or alternate collateral meeting the
requirements of subdivision (e) is not provided.
(H) If the letter of credit is governed by the 1983 revision of
the Uniform Customs and Practice for Documentary Credits of the
International Chamber of Commerce (Publication 400 or 500), or any
successor revision approved by the commissioner, it shall contain a
provision for an extension of time, of not less than 30 days after
resumption of business, to draw against the letter of credit in the
event that one or more of the occurrences described in Article 19 of
Publication 400 or 500 occurs.
(I) Is issued by a bank, trust company, or savings association
that meets all of the following criteria:
(i) Is organized and existing under the laws of the United States
or any state thereof or, in the case of a financial institution
organized under the laws of a foreign country, has a branch or agency
office licensed under the laws of the United States or any state
thereof and is domiciled in a member country of the Organization of
Economic Co-operation and Development having a sovereign rating in
one of the top two generic lettered rating classifications by a
securities rating agency acceptable to the commissioner.
(ii) Has (or is the principal operating subsidiary of a financial
institution holding company that has) a long-term debt rating of at
least investment grade.
(iii) Is not a parent, subsidiary or affiliate of the trustee or
paying agent, if any, with respect to the insured obligation if that
trustee or paying agent is the named beneficiary of the letter of
credit.
(5) The amount of credit protection available to the insurer (or
its nominee) under each credit default swap that satisfies each of
the following:
(A) May not be amended without the consent of the insurer and may
only be terminated in accordance with one of the following:
(i) At the option of the insurer.
(ii) At the option of the counterparty to the insurer (or its
nominee), if the credit default swap provides for the payment of a
termination amount equal to the replacement cost of the terminated
credit default swap determined with reference to standard
documentation of the International Swap and Derivatives Association,
Inc. or otherwise acceptable to the commissioner.
(iii) At the discretion of the commissioner acting as
rehabilitator, liquidator, or receiver of the insurer upon payment by
or on behalf of the insurer of any termination amount due from the
insurer.
(B) Provides for payment under all instances in which payment
under a financial guaranty insurance policy is required, except that
payment under the credit default swap may be on a first loss, excess
of loss, or other nonpro-rata basis and may apply on an aggregate
basis to more than one policy.
(C) Is provided by one of the following:
(i) A counterparty whose obligations under the credit default swap
are insured by a financial guaranty insurance corporation licensed
under this article or guaranteed by a financial institution referred
to in clauses (ii) and (iii) of this subparagraph.
(ii) A financial institution satisfying the requirements of
clauses (i) to (iii), inclusive, of subparagraph (I) of paragraph
(4), provided that obligations of the financial institution on parity
with its obligations under the credit default swap are rated as
investment grade, and further provided that, if the financial
institution is not organized under, or acting through a branch or
agency office licensed under, the laws of the United States or any
state thereof, then the financial institution is required to
collateralize the replacement cost of the credit default swap in the
event that it fails to maintain the investment grade rating.
(iii) Any other financial institution that the commissioner
determines to be substantially similar to any specified in clause (i)
or (ii).
(iv) The requirements of this subparagraph shall not be construed
as authority for an insurer domiciled in the United States to issue
credit default swaps unless the insurer has explicit authority to
issue credit default swaps.
Collateral shall be deposited with or held by the financial
guaranty insurance corporation, held by a trustee or agent for the
benefit of the financial guaranty insurance corporation in trust or
to perfect a security interest, or held in trust pursuant to the bond
indenture or other trust arrangement by a trustee or custodian for
the benefit of holders of the insured obligations in the form of
funds for payment of insured obligations, sinking funds, or other
reserves which that may be used for the
payment of insured obligations, collateral agent fees and trustee
fees, or reimbursement of the financial guaranty insurance
corporation on any obligation insured by the corporation.
Any such The trustee, custodian, or agent shall
be a bank, savings association, depository institution, or other
entity acceptable to the commissioner, the deposits of which are
insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation (or any
successors thereto), or in the case of banking organizations
organized under the laws of a foreign country in addition satisfies
the requirements of clauses (i) and (ii) of subparagraph (I) of
paragraph (4) of subdivision (e) of Section 12100
, and, in each case which that has a
net worth of at least twenty-five million dollars ($25,000,000).
Any such The trustee or agent may also
be an approved or qualified servicer or originator of the kind of
assets which that comprise the
collateral which that maintains in
force at all times errors and omissions insurance applicable to the
trust or agency activities, including without limitation, a servicer
qualified under a federal or state insurance or guaranty program to
service loans or mortgage loans. The
commissioner may adopt regulations, bulletins, notices or
orders to limit the amount of collateral provided by obligations,
letters of credit, or credit default swaps, or to limit the amount of
collateral provided by any single issuer, bank, or counterparty as
provided for in this subdivision. The commissioner may also require
additional reporting as deemed necessary.
(f) "Commercial real estate" means income-producing real property
other than residential property consisting of less than five units.
(g) "Contingency reserve" means an additional liability reserve
established to protect policyholders against the effects of adverse
economic cycles or other unforeseen circumstances.
(h) "Credit default swap" means an agreement referencing credit
derivative definitions published from time to time by the
International Swap and Derivatives Association, Inc., or otherwise
acceptable to the commissioner, pursuant to which a party agrees to
compensate another party in the event of a payment default by,
insolvency of, or other adverse credit event in respect of, an issuer
of a specified security or other obligation; provided that the
agreement does not constitute an insurance contract and the making of
the credit default swap does not constitute the transaction of
insurance.
(i) "Excess spread" means, with respect to any insured issue of
asset-backed securities, the excess of (A) the scheduled cashflow on
the underlying assets that is reasonably projected to be available,
over the term of the insured securities after payment of the expenses
associated with the insured issue, to make debt service payments on
the insured securities over (B) the scheduled debt service
requirements on the insured securities, provided that this excess is
held in the same manner as collateral is required to be held under
subdivision (e).
(j) "Financial guaranty insurance corporation" means an insurer
transacting financial guaranty insurance.
(k) "Governmental unit" means a state, territory, or possession of
the United States of America, the District of Columbia, the country
of Canada, a province of Canada, the United Kingdom, a public
authority of the United Kingdom, a member country of the Organization
for Economic Co-operation and Development having a sovereign rating
in one of the top two generic lettered rating classifications by a
securities rating agency acceptable to the commissioner, a
municipality, or a political subdivision of any of the foregoing, or
any public agency or instrumentality thereof.
(l) "Guarantees of consumer debt obligations" means insurance
policies indemnifying a purchaser or lender against loss or damage
resulting from defaults on a pool of debts owed for extensions of
credit (including in respect of installment purchase agreements and
leases) to individuals provided in the normal course of the purchaser'
s or lender's business, provided that the pool meets the requirements
of paragraph (2) of subdivision (c) and that the pool has been
determined to be investment grade. Policies providing that coverage
shall contain a provision that all liability terminates upon sale or
transfer of the underlying obligation to any transferee that is not
an insured of the financial guaranty insurance corporation under a
similar policy.
(m) "Industrial development bond" means any security, or other
instrument under which a payment obligation is created, issued by or
on behalf of a governmental unit to finance a project serving a
private industrial, commercial, or manufacturing purpose and not
guaranteed by a governmental unit.
(n) "Insurable risk" means that the obligation on an uninsured
basis has been determined to be not less than investment grade. With
respect to asset-backed securities as defined in subdivision (c), the
determination shall be, based solely on the pool of assets backing
the insured obligation or securing the financial guaranty insurance
corporation, without consideration of the creditworthiness of the
issuer.
(o) "Investment grade" means that the obligation or parity
obligation of the same issuer is rated in one of the top four generic
lettered rating classifications by a securities rating agency
acceptable to the commissioner, that the obligation or parity
obligation of the same issuer, without regard to financial guaranty
insurance, has been identified in writing by that rating agency as an
insurable risk deemed to be of investment grade quality, or that the
obligation or parity obligation of the same issuer has been
determined to be investment grade (as indicated by a category 1 or 2
rating) by the Securities Valuation Office of the National
Association of Insurance Commissioners.
(p) "Municipal bonds" means municipal obligation bonds and special
revenue bonds.
(q) (1) "Municipal obligation bond" means any security, or other
instrument, including a lease payable or guaranteed by the United
States or another national government that qualifies as a
governmental unit, or any agency, department, or instrumentality
thereof, or by a state or an equivalent subdivision of another
national government that qualifies as a governmental unit, but not a
lease of any other governmental unit, under which a payment
obligation is created, issued by or on behalf of a governmental unit
or issued by a special purpose corporation, special purpose trust, or
other special purpose legal entity to finance a project or
undertaking serving a substantial public purpose, and which
that is one or more of the following:
(A) Payable from tax revenues, but not tax allocations, within the
jurisdiction of the governmental unit.
(B) Payable or guaranteed by the United States of America or
another national government that qualifies as a governmental unit, or
any agency, department, or instrumentality thereof, or by a housing
agency of a state or an equivalent political subdivision of another
national government that qualifies as a governmental unit.
(C) Payable from rates or charges (but not tolls) levied or
collected in respect of a nonnuclear utility project, public
transportation facility (other than an airport facility) or public
higher education facility.
(D) With respect to lease obligations, payable from past, present,
or future appropriations.
(2) Notwithstanding paragraph (1), obligations of a special
purpose corporation, special purpose trust, or other special purpose
legal entity shall not be considered municipal obligation bonds
unless the obligations are investment grade at the time of issuance,
the obligations are payable from sources enumerated in subparagraphs
(A) to (D), inclusive, and the project being financed or the tolls,
tariffs, usage fees, or other similar rates or charges for its use
are subject to regulation or oversight by a governmental entity.
(r) "Parent" means a person that, directly or indirectly, owns at
least 50 percent of a financial guaranty insurance corporation.
(s) "Reinsurance" means cessions qualifying for credit under
Section 12121.
(t) "Security" or "secured" means any of the following:
(1) A deposit at least equal to the full amount of the outstanding
principal of the insured obligation.
(2) Collateral, as defined by subdivision (e), at least equal to
the full amount of the outstanding principal of the insured
obligation or that has a market value or scheduled cashflow
which that is equal to or greater than the
scheduled debt service on the insured obligation.
(3) Property, provided the financial guaranty insurance
corporation or the trustee has possession of evidence of the right,
title, or authority to claim or foreclose thereon or otherwise
dispose of the property for value, the scheduled cashflow from which,
or market value thereof, is at least equal to the scheduled debt
service on the insured obligation.
(u) "Special revenue bond" means any security or other instrument
under which a payment obligation is created, issued by or on behalf
of, or payable or guaranteed by, a governmental unit to finance a
project or undertaking serving a substantial public purpose and not
payable from the sources enumerated in subdivision (q) or securities
which that are substantially similar to
the foregoing issued by any of the following:
(1) A not-for-profit corporation.
(2) A special purpose corporation, special purpose trust or other
special purpose legal entity, provided that the obligations are
investment grade at the time of issuance, the obligations are not
payable from the sources enumerated in subparagraphs (A) to (D),
inclusive, of paragraph (1) of subdivision (q), and the project being
financed or the tolls, tariffs, usage fees, or other similar rates
or charges for its use are subject to regulation or oversight by a
governmental entity.
(v) "Subsidiary" means a person that, directly or indirectly, is
at least 50 percent owned by a financial guaranty insurance
corporation.
(w) "Total net liability" of a financial guaranty insurance
corporation means the aggregate amount of insured unpaid principal,
interest, and other monetary payments, if any, of guaranteed
obligations insured or assumed, less reinsurance and less collateral.
(x) "Utility first mortgage obligation" means an obligation of an
issuer secured by a first priority mortgage on property owned or
leased by an investor-owned or cooperative-owned utility company and
located in the United States, Canada, or a member country of the
Organization for Economic Co-operation and Development having a
sovereign rating in one of the top two generic lettered rating
classifications by a securities rating agency acceptable to the
commissioner, provided that the utility or utility property or the
usage fees or other similar utility rates or charges are subject to
regulation or oversight by a governmental entity.
SEC. 18. Chapter 2 (commencing with Section 12420) of Part 6 of
Division 2 of the Insurance Code is repealed.
SEC. 19. Section 12961 of the Insurance Code is repealed.
12961. (a) The commissioner shall provide to the Governor, the
Legislature, and to the committees of the Senate and Assembly having
jurisdiction over insurance an analysis of the following types of
actions in the annual report submitted pursuant to Section 12922:
(1) Medical malpractice actions.
(2) Toxic substance tort actions.
(3) Product and design liability actions.
(4) Tort actions in which a public entity is a defendant.
(5) Tort actions involving judgments or settlements of one million
dollars ($1,000,000) or more.
(6) Class action tort actions.
(7) Defamation and invasion of privacy actions.
(8) Other categories of tort actions involving commercial
liability claims as the commissioner deems necessary.
(b) The study may exclude actions in which the only defendant is
an individual sued in his or her private capacity. The study may
exclude limited civil cases.
(c) If any of the information required to be provided by the
parties is confidential under any other provision of law or pursuant
to any court order, the commissioner shall keep that information
confidential and shall limit its analysis of that information to
aggregate data or other analyses which will not reveal the identity
of the parties.
SEC. 20. Section 12962 of the Insurance Code is amended to read:
12962. The commissioner shall report to the Governor, the
Legislature, and to the committees of the Senate and Assembly having
jurisdiction over insurance all of the following in the annual report
submitted pursuant to Section 12922:
(a) An analysis of the information required by Sections 674.5,
1857.7, 1857.9 , 1864 , and 12963, including, but
not limited to, all of the following:
(1) An aggregate and an average for all insurers for each item of
information required by these sections.
(2) The number of insurers reporting policies written for each
class during the calendar year.
(3) For each class, the number of insurers reporting a combined
loss ratio of 100 percent or more, and the number reporting a
combined loss ratio of under 100 percent.
(4) An analysis of adjustments made to loss reserves for prior
years.
(5) The change in any item required to be included by paragraphs
(1) to (4), inclusive, from the immediately prior year.
(b) An analysis of the activities of the Department of
Insurance department in implementing the
provisions of Proposition 103 on the November 8, 1988, general
election ballot, as set forth in Article 10 (commencing with Section
1861.01) of Chapter 9 of Part 2 of Division 1.
(c) Recommendations and proposals, including suggested
legislation, to protect consumers from arbitrary insurance rates and
practices, to encourage a competitive insurance marketplace, to
provide for an accountable Insurance Commissioner
commissioner , and to ensure that insurance is fair,
available, and affordable for all Californians.
(d) The requirements of this section shall be satisfied if the
analysis required by this section is included in the annual report to
the Governor required by Section 12922, and a copy of that report is
provided to the Legislature.