BILL ANALYSIS Ó 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