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