BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1234|
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THIRD READING
Bill No: AB 1234
Author: Levine (D)
Amended: 7/1/14 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 10-0, 6/11/14
AYES: Monning, Gaines, Corbett, Correa, DeSaulnier, Mitchell,
Nielsen, Roth, Torres, Vidak
NO VOTE RECORDED: Lieu
SENATE JUDICIARY COMMITTEE : 7-0, 6/24/14
AYES: Jackson, Anderson, Corbett, Lara, Leno, Monning, Vidak
ASSEMBLY FLOOR : 72-0, 1/23/14 (Consent) - See last page for
vote
SUBJECT : Insurance: registration statements
SOURCE : Department of Insurance
DIGEST : This bill excludes information and documents provided
to the Insurance Commissioner (IC) pursuant to the Insurance
Holding Company System Regulatory Act (Holding Company Act) from
the civil discovery process and prohibits admission of that
information and materials as evidence in private civil actions.
ANALYSIS :
Existing law
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1. Empowers the IC to examine an insurer subject to the Holding
Company Act to ascertain the enterprise risk to which the
insurer is subjected by the ultimate controlling party or by
any entity or combination of entities within the insurance
holding company system.
2. Requires certain insurers to file with the IC a registration
that discloses material information and documents that might
reveal potential financial vulnerabilities, including:
3. Requires certain insurers to file:
A. Summaries of, and amendments or modifications to,
registration statements;
B. Notices of specified dividends;
C. Notices of certain transactions between affiliates
within a holding company system;
D. Notices of investments in any one corporation if the
total investment by the holding company system exceeds
10% of the corporation's voting securities;
E. And other documents and information.
4. Protects specified information and documents gathered by the
IC pursuant to the Holding Company Act from subpoena or
disclosure pursuant to the Public Records Act.
5. Permits the IC to share information with other insurance
regulators that have statutes or regulations with similar
confidentiality and privilege protections and who agree not
to disclose the information.
6. Permits the IC to enter into written agreements with the
National Association of Insurance Companies (NAIC) governing
the sharing and use of information obtained pursuant to the
Holding Company Act on the condition that the agreements
provide specified information.
This bill
1. Prohibits the discovery of information and documents provided
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to the IC pursuant to the Holding Company Act in a private
civil action.
2. Deems that information and those documents inadmissible in a
private civil action.
3. States that Section 1 of the Holding Company Act imposes a
limitation on the public's right of access to the writings of
public officials and agencies within the meaning of Section 3
of Article I of the California Constitution.
Background
Insurance Holding Company System Regulatory Act . An insurance
holding company system consists of two or more affiliated
persons, and one or more is an insurer. These systems can grow
very complex and involve transactions that shift control and
accountability to a remote person or entity. Ownership and
control of a holding company system may pass through variety of
persons or entities so that a regulator may have a difficult
time identifying who is actually controlling the insurer. In
order to provide insurance regulators the appropriate tools to
track down "who" is controlling "what" in a holding company
system, the NAIC developed the model Holding Company Act and
accompanying model regulations. (The NAIC is the U.S.
standard-setting and regulatory support organization created by
and composed of the chief insurance regulators from the 50
states.)
In December 2010, the NAIC adopted significant revisions to the
model Holding Company Act in response to concerns that insurance
regulators lacked the necessary authority to adequately
understand how non-insurance entities within a holding company
system might pose a risk to an insurer, particularly given the
financial difficulties experienced by a noninsurance affiliate
of the AIG insurance holding company system during the most
recent financial crisis.
Senate Bill 1448 (Calderon, Chapter 282, Statutes of 2012),
conformed California law to the revised model law and
regulations. One purpose of that bill was to considerably
broaden the insurer's obligation to provide, and the IC's
authority to obtain, proprietary and confidential information.
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Confidentiality and Privilege of Information Gathered for
Regulatory Purposes. Because of the sensitive nature of the
information shared under the Holding Company Act, SB 1448
provided that confidential information shared with the IC under
that authority is not subject to subpoena or disclosure under
the Public Records Act. The additional protection against
disclosure to third parties helps to ensure the critical
cooperation and full disclosure of insurers and affiliates who
otherwise may be forced seek protection under other law.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 7/1/14)
Department of Insurance (source)
ARGUMENTS IN SUPPORT : According to the Department of
Insurance (CDI), many insurers that are domiciled in other
countries, particularly Europe, have been quite aggressive in
attempting to rebuff appropriate regulatory investigative
activities of not only CDI but other states within the NAIC
framework. Ensuring confidentiality of information is
fundamental to counter such attempts to thwart proper regulatory
activity.
ASSEMBLY FLOOR : 72-0, 1/23/14
AYES: Achadjian, Allen, Atkins, Bigelow, Bloom, Bocanegra,
Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Garcia,
Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman,
Hall, Holden, Jones, Levine, Linder, Logue, Maienschein,
Mansoor, Medina, Melendez, Morrell, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel
Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez,
Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber,
Wieckowski, Wilk, Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Alejo, Ammiano, Donnelly, Beth Gaines,
Harkey, Roger Hernández, Jones-Sawyer, Lowenthal
AL:d 7/2/14 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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