BILL ANALYSIS Ó
AB 553
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Date of Hearing: April 8, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 553
(Daly) - As Amended April 6, 2015
SUBJECT: Insurance: Corporate Governance
SUMMARY: Adopts corporate governance model laws adopted by the
National Association of Insurance Commissioners (NAIC) and
clarifies existing law relating to the oversight of financially
troubled international insurers. Specifically, this bill:
1)States legislative findings supporting the need to preserve
the confidentiality of corporate governance information
provided to the Insurance Commissioner (commissioner).
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2)Requires most insurers to annually submit a Corporate
Governance Annual Disclosure (CGAD) report to the
commissioner.
3)Permits the commissioner to require an insurer to submit a
CGAD report if the insurer is not otherwise required to do so.
4)Permits the insurer or insurance group to select which level
of its corporate structure will be described in the CGAD.
5)Permits the commissioner to adopt regulations to implement the
bill.
6)Permits the commissioner to request additional information
based on the CGAD report.
7)Requires the insurer or insurance group to prepare the CGAD
report in compliance with NAIC requirements.
8)Provides that the CGAD report and any related documents are
proprietary information and are not subject to disclosure by
the commissioner under the Public Records Act, subpoena, or
discovery.
9)Provides that the CGAD report and any related documents are
inadmissible in any private civil action if they obtained from
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the commissioner.
10)Permits the commissioner to use and share with other
regulators the CGAD report and any related documents for
regulatory purposes.
11)Permits the commissioner to retain third party experts, at
the insurer's expense, to assist the commissioner in reviewing
the CGAD report and related documents.
12)Imposes a fee for an insurer that is late filing the CGAD
report.
13)Clarifies that the commissioner, or designee, may participate
in a supervisory college.
EXISTING LAW:
1)Governs the business of insurance and authorizes the
commissioner to provide oversight over the insurance industry
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including insurance holding companies (IHC).
2)Requires an IHC to submit information regarding the legal and
financial relationships between companies that are part of the
IHC.
3)Regulates a range of activities related to an IHC 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.
4)Requires that information reported to the commissioner in the
registration statement, and information disclosed in the
course of an examination or investigation of the registration
statement, be exempt from subpoena or public disclosure as a
general matter.
5)Provides for the establishment of "supervisory colleges" to
oversee financially troubled international insurers.
FISCAL EFFECT: Undetermined.
COMMENTS:
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1)Purpose . According to the author, this bill adopts the NAIC
model law on corporate governance. The report required by
this bill provides the California Insurance Commissioner with
a summary of an insurer or insurance group's corporate
practices and governance framework. This bill also adopts
changes to the Insurance Holding Company System Regulatory Act
that clarify to other regulators (e.g., international and/or
federal regulators) that the California Department of
Insurance has the authority to participate in or act as the
group-wide supervisor of a large internationally active
insurance group.
2)Supervisory Colleges . Insurance holding companies with an
international presence pose special challenges to regulators.
This bill clarifies the authority for the Commissioner to
participate in supervisory colleges that provide for
cooperation among regulatory jurisdictions (including federal
and international regulators) in order to examine a domestic
insurer that is part of an IHC system with international
operations. Supervisory colleges may be convened on temporary
or permanent bases and used to assess the business strategy,
financial position, legal and regulatory position, risk
exposure, risk management, and governance processes.
REGISTERED SUPPORT / OPPOSITION:
Support
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Department of Insurance (sponsor)
Opposition
None received
Analysis Prepared by:Paul Riches / INS. / (916) 319-2086