BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 1053
                                                                  Page  1

          Date of Hearing:   May 8, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                AB 1053 (Cooley) - As Introduced:  February 22, 2013 

          Policy Committee:                              InsuranceVote:13  
          - 0 

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill increases the threshold from $25,000 to $50,000 in  
          premiums paid for an insured employer of 25 or more to qualify  
          as an industrial-insured.

           FISCAL EFFECT  

          There are no significant costs associated with this legislation.  


           COMMENTS  

           1)Rationale  . 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 (CPI) is applied to the current level of premiums paid  
            by those entities that meet the industrial insured definition  
            for surplus line insurance the $25,000 threshold would have  
            grown to almost $40,000. Because insurance risks that are  
            placed with non-admitted, surplus line insurers are generally  
            hard to get or high risk coverage, the premiums and premium  
            growth for such insurance most likely exceed the CPI and, the  
            author believes, justify the proposed change in the  
            eligibility to qualify as an industrial insured.  

           2)Industrial Insured  is a sophisticated purchaser of surplus  
            line insurance. They are considered industrial insured because  
            they have over 25 employees and are purchasing a large amount  
            of insurance and they generally purchase that insurance  
            directly from an insurance company rather than through a  
            broker. Being labeled industrial-insured in this context  








                                                                  AB 1053
                                                                  Page  2

            simply means that brokers and insurance companies are not  
            required to send the insured certain notices that they are  
            required to send on an annual basis to nonindustrial-insured  
            customers. 

           1)Surplus Line Insurance  . Current law authorizes non-admitted  
            insurance companies (i.e., companies that are not licensed in  
            California) to issue policies when the insurance that the  
            policyholder needs is not available from admitted California  
            insurers. A well known example of this type of insurer is  
            Lloyd's of London which famously insured Betty Grable's legs  
            for $1 million each in the 1940s and Bruce Springsteen whose  
            voice was insured for $6 million in the 1980s. This type of  
            insurance is referred to as surplus line insurance. Only a  
            specially licensed surplus line broker can arrange for the  
            sale of surplus line insurance. 
             

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