BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 1053
                                                                  Page  1

          Date of Hearing:   April 24, 2013

                           ASSEMBLY COMMITTEE ON INSURANCE
                                Henry T. Perea, Chair
                 AB 1053 (Cooley) - As Introduced:  February 22, 2013
           
          SUBJECT  :   Surplus Line Insurance

           SUMMARY  :   Increases the threshold from $25,000 to $50,000 in  
          premium paid for an insured to qualify as an "industrial  
          insured."   

           EXISTING LAW  :

          1)Permits a surplus lines broker to issue a policy to an  
            industrial insured without specific notices and without the  
            insured's signature.

          2)Defines "industrial insured" as an employer with at least 25  
            employees and:

               a)     Has insurance premiums, excluding worker's  
                 compensation and health insurance, that exceed $25,000  
                 per year; or

               b)     Obtains insurance through a full time insurance  
                 manager/consultant.

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

           1)Purpose  .  According to the author, since 1994 insurance  
            premiums for commercial insurance coverage have increased like  
            most other goods and services. If just the Consumer Price  
            Index is applied to the current level of premiums paid by  
            those entities that meet the industrial insured definition the  
            $25,000 threshold would have grown to almost $40,000. Because  
            insurance risks that are placed with non-admitted insurers are  
            generally hard to get or high risk coverage, the premiums and  
            premium growth for such insurance most likely exceed the CPI  
            and justify the proposed change in the eligibility to qualify  
            as an industrial insured.

           2)Non-admitted Insurers  .  The non-admitted market (or surplus  








                                                                  AB 1053
                                                                  Page  2

            line market) is not unregulated, as some believe.   
            Non-admitted insurance carriers are regulated in their home  
            state and must be eligible under federal and California law  
            before business can be placed with them.  The California  
            Department of Insurance also licenses and regulates surplus  
            lines brokers who are authorized to sell insurance from  
            non-admitted insurers.  The California Insurance Code contains  
            a number of requirements designed to protect the insurance  
            purchaser, including the possibility of audit by the  
            California Department of Insurance.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Surplus Lines Brokers Association (sponsor)

           Opposition 
           
          None received
           
          Analysis Prepared by  :    Paul Riches / INS. / (916) 319-2086