BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 712| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 SB 712 Page 2 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 SB 712 Page 3 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 SB 712 Page 4 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 SB 712 Page 5 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 SB 712 Page 6 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 SB 712 Page 7 SUPPORT/OPPOSITION: SEE ABOVE **** END ****