BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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                              UNFINISHED BUSINESS


          Bill No:  SB 712
          Author:   Senate Insurance Committee 
          Amended:  8/25/11
          Vote:     21

           
           SENATE INSURANCE COMMITTEE  :  6-0, 4/13/11
          AYES:  Calderon, Corbett, Correa, Lieu, Lowenthal, Wyland
          NO VOTE RECORDED:  Gaines, Anderson, Price

           SENATE JUDICIARY COMMITTEE  :  5-0, 4/26/11
          AYES:  Evans, Harman, Blakeslee, Corbett, Leno

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           SENATE FLOOR  :  39-0, 5/23/11 (Consent)
          AYES:  Alquist, Anderson, Berryhill, Blakeslee, Calderon, 
            Cannella, Corbett, Correa, De León, DeSaulnier, Dutton, 
            Emmerson, Evans, Fuller, Gaines, Hancock, Hernandez, 
            Huff, Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, 
            Negrete McLeod, Padilla, Pavley, Price, Rubio, Runner, 
            Simitian, Steinberg, Strickland, Vargas, Walters, Wolk, 
            Wright, Wyland, Yee
          NO VOTE RECORDED:  Harman

           ASSEMBLY FLOOR  :  78-1, 8/30/11 - See last page for vote


           SUBJECT  :    Insurance

          SOURCE  :     Department of Insurance


                                                           CONTINUED





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           DIGEST  :    This bill requires every admitted property and 
          casualty insurer, unless exempt, to annually submit a 
          Statement of Actuarial Opinion with supporting documents 
          and an Actuarial Opinion Summary, as specified, and exempts 
          from public disclosure, required under the California 
          Public Records Act, all actuarial reports, workpapers, or 
          opinion summaries submitted in support of the Statement of 
          Actuarial Opinion, and such records would not be subject to 
          subpoena or discovery, or be admissible in evidence in any 
          private party civil action.  In addition, this bill 
          extends, from January 1, 2013 to January 1, 2023, the time 
          for bonds to be issued on behalf of the California 
          Insurance Guarantee Association to pay the claims of 
          insolvent workers' compensation insurers.

           Assembly Amendments  add the contents of SB 711 (Senate 
          Insurance Committee), which passed the Senate (40-0) on May 
          5, 2011, into this bill.  SB 711 extended, from January 1, 
          2013 until January 1, 2023, the time for bonds to be issued 
          on behalf of the California Insurance Guarantee Association 
          to pay the claims of insolvent workers' compensation 
          insurers.

           ANALYSIS :    

          Existing law:

          1. Generally requires insurers to provide annual, 
             quarterly, and supplemental financial statements in 
             conformity with the standards adopted by the National 
             Association of Insurance Commissioners. 

          2. Provides that the commissioner shall examine every 
             domestic insurer before issuing to it a certificate of 
             authority, other than renewal, to transact any class of 
             insurance in California.  When scheduling and 
             determining the nature, scope, and frequency of 
             examinations, the commissioner shall consider, among 
             other things, actuarial opinions.  

          3. Provides that a commissioner may make public any final 
             or preliminary examination report, any examiner or 
             company workpapers or other documents, or any other 
             information discovered or developed during the course of 







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             any examination in the furtherance of any legal or 
             regulatory action which the commissioner may deem 
             appropriate.  However, all working papers, recorded 
             information, documents, and copies thereof produced by, 
             obtained by, or disclosed to the commissioner or any 
             other person in the course of an examination made shall 
             be given confidential treatment and are not subject to 
             subpoena and shall not be made public by the 
             commissioner or any other person, except as specified.
           
          4. Requires admitted life and disability insurers to submit 
             annual actuarial opinions or statements, as specified.  

          5. Exempts from public disclosure any memorandum or 
             material submitted in support of a life or disability 
             insurer's actuarial opinion unless (a) the insurer 
             consents in writing to disclosure; (b) the American 
             Academy of Actuaries provides a written request and 
             statement for the materials, which are required for 
             professional disciplinary proceedings and that the 
             Academy observes the commissioner's confidentiality 
             requirements; or (c) the insurer uses the confidential 
             material as part of its marketing efforts, releases the 
             material to any government agency other than a state 
             insurance department, or releases the material to any 
             news medium.  

          6. Provides that the confidential material related to a 
             life or disability insurer's actuarial opinion shall be 
             subject to subpoena on the commissioner's consent or 
             after notice to the commissioner and all other 
             interested parties and a hearing in which the superior 
             court determines that the need for the subpoena 
             outweighs the interests of the insurer or actuary in 
             preventing disclosure of the material and the public 
             interest and any ongoing investigation or proceeding 
             conducted by the commissioner will not be unnecessarily 
             jeopardized by compliance with the subpoena.  

          This bill:

          1. Requires admitted property and casualty insurers, unless 
             exempt, to submit an annual Statement of Actuarial 
             Opinion, with an Actuarial Report and underlying 







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             workpapers, and Actuarial Opinion Summary, as specified. 
              Admitted insurers not domiciled in California would be 
             required to submit an Actuarial Opinion Summary upon 
             request of the commissioner.

          2. In the event the admitted property and casualty insurer 
             fails to provide an acceptable Actuarial Report, 
             authorizes the commissioner to engage, at the expense of 
             the insurer, a qualified actuary to review the Actuarial 
             Opinion and prepare the supporting Actuarial Report.

          3. Authorizes the commissioner to adopt regulations related 
             to the terms and conditions required by the Property and 
             Casualty Annual Statement Instructions of the National 
             Association of Insurance Commissioners.

          4. Provides that the Statement of Actuarial Opinion shall 
             be a public record and open to inspection, as specified.

          5. Exempts from disclosure required under the California 
             Public Records Act all admitted property and casualty 
             insurer Actuarial Reports, workpapers, or Actuarial 
             Opinion Summaries submitted in support of the Statement 
             of Actuarial Opinion, and such records would be 
             confidential by law and privileged and would not be 
             subject to subpoena or discovery, or be admissible in 
             evidence in any private party civil action.

          6. Provides that this bill will not limit the 
             commissioner's authority to release the Actuarial Report 
             or Actuarial Opinion Summary and supporting documents to 
             the American Academy of Actuaries' Actuarial Board for 
             Counseling and Discipline (ABCD) if the documents are 
             required for the purpose of professional disciplinary 
             proceedings and the ABCD establishes confidentiality 
             procedures sufficient to satisfy the commissioner.  This 
             bill also will not limit the commissioner's authority to 
             use these documents in furtherance of any regulatory or 
             legal action brought as part of the commissioner's 
             official duties.

          7. Authorizes the commissioner to disclose documents, as 
             specified, to the insurance department of this or any 
             other state or country, or to law enforcement officials 







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             of this or any other state or agency of the federal 
             government at any time, or to the National Association 
             of Insurance Commissioners, provided the recipient of 
             the report or matters relating thereto agrees in writing 
             to hold it confidential and in a manner consistent with 
             this article, unless the prior written consent of the 
             company to which it pertains has been obtained.

          8. Extends the time for bonds to be issued on behalf of the 
             California Insurance Guarantee Association to pay claims 
             of insolvent workers compensation insurers from January 
             1, 2013, to January 1, 2023.

          9. Places in the California Life and Health Insurance 
             Guarantee Association law an uncodified provision 
             included in SB 1408 (Senate Banking, Finance and 
             Insurance Committee), Chapter 334, Statutes of 2010.  
             The uncodified provision made the application of SB 1408 
             prospective only by stating that the amendments made to 
             the California Life and Health Insurance Guarantee 
             Association Act by SB 1408 shall not apply to any member 
             insurer that, before the effective date of this act, has 
             been placed under an order of liquidation with a finding 
             of insolvency.

          10.Strikes a single erroneous cross-reference to a 
             provision no longer in the law.

          11.Makes various technical corrections to Insurance Code 
             statutes.

          12.Makes a finding that in order to protect proprietary 
             information, it is necessary to enact legislation that 
             the actuarial supporting documents provided pursuant to 
             this act are kept confidential.

           Background  

          The Department of Insurance participates in an insurance 
          regulator accreditation program developed by the National 
          Association of Insurance Commissioners (NAIC).  This 
          accreditation program provides uniformity among the member 
          state insurance departments as well as consumer 
          protections.  Periodically, NAIC develops uniform insurance 







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          standards which are included in NAIC's model laws.  Each 
          member of the accreditation program must then adopt the 
          model laws in order to maintain its accreditation.

          Last year, NAIC adopted new requirements under its Property 
          and Casualty Opinion Model Law which require property and 
          casualty insurers to annually submit actuarial documents to 
          their respective state departments of insurance.  In order 
          to maintain its accreditation in the NAIC program, 
          California must adopt these requirements.

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

           SUPPORT  :   (Verified  8/29/11)

          Department of Insurance (source)
          Association of California Life and Health Insurance 
          Companies
          California Insurance Guarantee Association
          California Life and Health Insurance Association
          Pacific Life Insurance Company



           ASSEMBLY FLOOR  :  78-1, 8/30/11
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Charles Calderon, Campos, 
            Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, 
            Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth 
            Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, Hagman, 
            Halderman, Hall, Harkey, Hayashi, Roger Hernández, Hill, 
            Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, 
            Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, 
            Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, 
            Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, 
            Skinner, Smyth, Solorio, Swanson, Torres, Valadao, 
            Wagner, Wieckowski, Williams, Yamada, John A. Pérez
          NOES:  Donnelly
          NO VOTE RECORDED:  Gorell


          JJA:mw  8/30/11   Senate Floor Analyses 







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                         SUPPORT/OPPOSITION:  SEE ABOVE

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