BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1234
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 1234 (Levine)
          As Amended  July 1, 2014
          Majority vote
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |72-0 |(January 23,    |SENATE: |34-0 |(August 19,    |
          |           |     |2014)           |        |     |2014)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:    INS.
           
           SUMMARY  :  Further protects information collected by the  
          Insurance Commissioner from disclosure.  Specifically,  this  
          bill  :  

          1)Prohibits the discovery of information provided to the  
            Insurance Commissioner (commissioner) pursuant to the  
            Insurance Holding Company System Regulatory Act (Holding  
            Company Act), that is already exempt from disclosure under the  
            Public Records Act, in a private civil action.  

          2)Provides that information collected by the commissioner  
            pursuant to the Holding Company Act and is exempt from  
            disclosure under the Public Records Act is not admissible in a  
            private civil action.

          3)Makes legislative findings regarding the need to preserve the  
            confidentiality of proprietary information obtained by the  
            commissioner in the course of implementing the Holding Company  
            Act.  
           
           EXISTING LAW  : 

          1)Governs the business of insurance and authorizes the  
            commissioner to provide oversight over the insurance industry.

          2)Establishes the Holding Company Act which requires insurers  
            authorized to do business in this state that are part of an  
            Insurance Holding Company System (IHCS) to register with the  
            commissioner.  

          3)Requires registration forms to include information regarding  
            the legal and financial relationships between members of the  
            IHCS.








                                                                  AB 1234
                                                                  Page  2


          4)Regulates a range of activities related to an IHCS including:

             a)   Acquisition of subsidiaries by domestic insurers.

             b)   Acquisition of domestic insurers by non-insurance  
               companies.

             c)   Transactions between registered insurers and their  
               affiliates. 

             d)   Transactions between members of an IHCS.

             e)   Payments of extraordinary dividends or distributions by  
               registered insurers.
           
          FISCAL EFFECT  :  Unknown

           COMMENTS  :   

          1)Purpose.  According to the sponsor (Department of Insurance),  
            this bill contains a technical and clarifying amendment to  
            conform California law with the model law adopted by the  
            National Association of Insurance Commissioners (NAIC).  This  
            bill ensures that confidential information obtained by the  
            Department of Insurance in the course of enforcing the Holding  
            Company Act remains confidential.  The Holding Company Act  
            protects consumers by ensuring the solvency of insurers  
            regulated by the Department of Insurance.

          2)Prior legislation  .   In 2012, SB 1448 (Calderon), Chapter 282,  
            was enacted to conform California law with the NAIC model law  
            regarding the regulation of insurance holding companies.  SB  
            1448 substantially broadened the commissioner's authority to  
            obtain otherwise proprietary information from insurers and  
            provides that confidential information shared with the  
            commissioner under that authority is not subject to disclosure  
            under the public records act.  The language added by SB 1448  
            is drawn from the NAIC model law.

          3)Limited effect. This bill does not preclude a court from  
            considering a discovery request by a party seeking information  
            from an insurer, nor does it affect the admissibility of that  
            information should it be obtained through discovery from the  
            insurer.  Rather, it simply provides that if confidential  








                                                                  AB 1234
                                                                  Page  3

            information is provided to the commissioner, it is not  
            obtainable from the commissioner.  
                
           4)NAIC.  The NAIC is the United States (U.S.) standard-setting  
            and regulatory support organization created by and composed of  
            the chief insurance regulators from the 50 states, the  
            District of Columbia and five U.S. territories.  The NAIC  
            establishes standards and best practices, conducts peer  
            reviews, and coordinates regulatory oversight by insurance  
            commissioners in the U.S.  NAIC is a key part of the national  
            system of state-based insurance regulation.  The NAIC's  
            primary mission is to promote uniform practices amongst states  
            in regulating multi-state insurers.  To support this effort,  
            the NAIC maintains an insurance regulator accreditation  
            program and develops uniform standards known as Model Laws.   
            The NAIC performs an on-site accreditation review of each  
            insurance regulator at least every five years.  An insurance  
            regulator's accreditation status is dependent on its adoption  
            of statutes and regulations that align with the Model Laws  
            adopted by the NAIC.  


           Analysis Prepared by  :    Paul Riches / INS. / (916) 319-2086  


                                                               FN: 0004286