BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 584
                                                                  Page  1

          Date of Hearing:   May 1, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

               AB 584 (Perea and Cooley) - As Amended:  April 15, 2013 

          Policy Committee:                              InsuranceVote:13  
          - 0 

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill implements a model law adopted by the National  
          Association of Insurance Commissioners (NAIC) requiring  
          insurance companies to implement and report on risk management  
          practices.  Specifically, this bill:  

          1)Requires insurers to maintain a risk management system to  
            identify, assess, monitor, manage, and report on material and  
            relevant risks.  

          2)Requires insurers to conduct an Own Risk Solvency Assessment  
            (ORSA) and submit it to the Insurance Commissioner at least  
            annually.

          3)Exempts insurers from the bill if the insurer has less than  
            $500 million per year in premiums and is part of an insurance  
            group with less than $1 billion per year in premiums.

          4)Provides that the bill takes effect on January 1, 2015.

           FISCAL EFFECT  

          Minor annual costs of approximately $45,000 due to increased  
          workload for the Department of Insurance. Those costs will be  
          fully recoverable from insurers. 

           COMMENTS  

           Rationale  . According to the sponsor, the California Insurance  
          Commissioner, the near collapse of the American International  
          Group (AIG) during the 2008 economic crisis revealed the need  








                                                                  AB 584
                                                                  Page  2

          for insurers and insurance groups to better evaluate their  
          risks.  In response, the NAIC adopted the ORSA model law to  
          establish regulatory oversight needed to assess an insurer's or  
          insurance group's ability to weather severe economic stress.   
          This bill protects consumers by helping to make sure insurers  
          and insurance groups conduct risk assessments every year and  
          submit them to the Insurance Commissioner. It establishes  
          enhanced risk management practices and provides the Commissioner  
          access to information to better understand the risks to which an  
          insurer or insurance group is exposed.


           Analysis Prepared by  :    Julie Salley-Gray / APPR. / (916)  
          319-2081