Amended in Senate August 19, 2015

Amended in Senate July 2, 2015

Amended in Senate June 25, 2015

Amended in Senate June 10, 2015

Amended in Assembly April 28, 2015

Amended in Assembly April 13, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 1072


Introduced by Assembly Member Daly

February 27, 2015


An act to add and repeal Sections 11401.5 and 11401.6 of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1072, as amended, Daly. Insurance: firefighters’ or police officers’ benefit and relief associations.

Existing law generally provides for the regulation of insurers by the Department of Insurance pursuant to laws set forth in the Insurance Code. Existing law authorizes the Insurance Commissioner to make certain examinations, investigations, and prosecutions and, upon making a determination of the existence of certain conduct, conditions, or grounds, to issue orders reasonably necessary to correct, eliminate, or remedy the conduct, conditions, or grounds.

Existing law exempts from the requirements set forth in the Insurance Code firemen’s, policemen’s, and peace officers’ benefit and relief associations that comply with specified criteria, including, among other things, a requirement that the membership consist solely of peace officers, members of police or fire departments, and emergency medical personnel employed by fire departments, as specified. Existing law prohibits an association from operating or doing business in the state without a certificate of authority.

This bill would require every association that holds a certificate of authority and that issues long-term disability or long-term care policies or contracts, as specified, to submit to the commissioner the opinion, as specified, of a qualified actuary as to whether the reserves and related actuarial items that support the policies or contracts issued arebegin delete based on assumptions thatend deletebegin insert expected to be adequate toend insert satisfy contractual provisions, arebegin delete consistent with prior reported amounts,end deletebegin insert based on reasonable assumptions,end insert and are based on specified actuarialbegin delete standards and procedures.end deletebegin insert standards.end insert The bill would also require an association seeking a certificate of authority to file an opinion that meets specified requirements and that establishes that it would have adequate resources to provide benefits, as specified, as required to satisfy its proposed contractual obligations. The bill would recognize that information submitted by a company pursuant to those provisions and in the possession or control of the department asbegin insert proprietary and containing trade secrets. The bill would require that information to beend insert confidential and privileged, exempt from disclosure by the commissioner pursuant to the California Public Records Act, and not subject to subpoena or discovery from the commissioner or admissible into evidence in a private civil action if obtained from the commissioner. The bill would require the commissioner to notify the association of the deficiencies in the filing if the association fails to provide an opinion and supporting memoranda to the commissioner that meets the requirements of the bill, as specified. The bill would require an association that self-funds all or part of the benefits to include specified disclosure language in all contracts that are not regulated by the department and in certificates evidencing coverage under those contracts. The bill would also require the commissioner, if he or she determines that the laws governing these associations are inadequate to protect the interests of the members of the associations, to develop and deliver recommendations to the Assembly Committee on Insurance and the Senate Committee on Insurance regarding changes in the lawbegin delete that would betterend deletebegin insert necessary toend insert protect the interests of members of the associations. The provisions of the bill would remain in effect only until December 31, 2018, and as of that date would be repealed.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P3    1

SECTION 1.  

Section 11401.5 is added to the Insurance Code,
2to read:

3

11401.5.  

(a) (1) Each association that holds a certificate of
4authority pursuant to this chapter and that issues long-term
5disability or long-term care policies or contracts shall submit to
6the commissioner the opinion of a qualified actuary as to whether
7the reserves and related actuarial items that support the policies
8or contracts issued pursuant to this chapter, including policies and
9contracts issued by entities established by these associations that
10provide benefits described in this chapter, arebegin delete based on assumptions
11thatend delete
begin insert expected to be adequate toend insert satisfy contractual provisions, are
12begin delete consistent with prior reported amounts,end deletebegin insert based on reasonable
13assumptions,end insert
and are based on actuarial standardsbegin delete and procedures
14establishedend delete
begin insert of practice publishedend insert by the American Academy of
15Actuaries and the Actuarial Standards Board. An association that
16holds a certificate of authority pursuant to this chapter shall file
17its opinion no later than July 1, 2016. The opinion shall have been
18completed no earlier than December 31, 2013.

19(2) An association is considered to have issued a long-term care
20or disability policy or contract if it self-funds all or part of the
21resulting obligation. An association that markets long-term policies
22or contracts issued by an insurer that is admitted by the department
23to offer insurance products in the state is exempt from this reporting
24requirement.

25(3) An association seeking a certificate of authority pursuant to
26this chapter shall file an opinion, to the extent feasible, that
27establishes that it would have adequate resources to provide
28benefits described in this chapter as required to satisfy its proposed
29contractual obligations.

P4    1(b) The opinion required by subdivision (a) shall includebegin delete an
2opinion withend delete
supporting memorandabegin delete consistent withend deletebegin insert fromend insert the same
3qualified actuary as to whether the reserves and related actuarial
4items held in support of the policies and contracts, when considered
5in light of the assets held by the association with respect to the
6reserves and related actuarial items, including, but not limited to,
7the investment earnings on the assets and the considerations
8anticipated to be received and retained under the policies and
9contracts, and shall make adequate provision for the association’s
10obligations under the policies and contracts, including, but not
11limited to, the benefitsbegin delete under anyend deletebegin insert and any administrative and
12operatingend insert
expenses associated with the policies and contracts.

13(c) The opinion required by subdivisionbegin delete (b)end deletebegin insert (a)end insert shall be governed
14by the following provisions:

15(1) It shall includebegin delete a memorandum, in form and substanceend delete
16begin insert supporting memorandaend insert consistent with actuarial standardsbegin delete and
17procedures acceptable toend delete
begin insert of practice published byend insert the American
18Academy of Actuaries and the Actuarial Standardsbegin delete Board, in
19support of the opinion.end delete
begin insert Board. end insert

20(2) If the association fails to provide an opinion and supporting
21memoranda to the commissioner that meets the requirements of
22this section, the commissioner shall notify the association of the
23deficiencies in the filing, and shall make a specific request that
24identifies the issues that should be addressed in an amended filing.
25begin insert The requests shall be consistent with actuarial standards of
26practice published by the American Academy of Actuaries and the
27Actuarial Standards Board.end insert

28(d) If the commissioner determines, after a review of the filings
29from the associations, that the laws governing these associations
30are inadequate to protect the interests of the members of the
31associations, he or she shall, on or before July 1, 2017, develop
32and deliver recommendations to the Assembly Committee on
33Insurance and the Senate Committee on Insurance regarding
34changes in the lawbegin delete that would betterend deletebegin insert necessary toend insert protect the
35interests of members of the associations.

36(e) Documents, materials, or other information, including the
37opinion with supporting memoranda, submitted pursuant to this
38section that are in the possession or control of the Department of
39Insurance and that are obtained by, created by, or disclosed to the
40commissioner or any other person pursuant to this section, are
P5    1recognized by this state as being proprietary and to contain trade
2secrets. Those documents, materials, or other information shall be
3confidential by law and privileged, shall not be subject to disclosure
4by the commissioner pursuant to the California Public Records
5Act (Chapter 3.5 (commencing with Section 6250) of Division 7
6of Title 1 of the Government Code), and shall not be subject to
7subpoena or discovery from the commissioner or admissible into
8evidence, in a private civil action if obtained from the
9commissioner. The commissioner shall not otherwise make those
10documents, materials, or other information public without the prior
11written consent of the association.

12(f) This section shall remain in effect only until December 31,
132018, and as of that date is repealed, unless a later enacted statute,
14that is enacted before December 31, 2018, deletes or extends that
15date.

16

SEC. 2.  

Section 11401.6 is added to the Insurance Code, to
17read:

18

11401.6.  

(a) An association that self-funds all or part of the
19benefits provided under this chapter shall include the following
20language, or other language approved by the commissioner, in all
21contracts that are not regulated by the department, and in
22certificates evidencing coverage under those contracts, in capital
23letters and in a minimum of 12-point type:


25“ALL OR A PORTION OF THE BENEFITS PROVIDED BY
26THIS CONTRACT ARE NOT SUBJECT TO REGULATION
27BY THE CALIFORNIA DEPARTMENT OF INSURANCE, AND
28THE CONTRACT IS NOT GUARANTEED BY THE
29CALIFORNIA LIFE AND HEALTH INSURANCE
30GUARANTEE ASSOCIATION.”


32(b) This section shall remain in effect only until December 31,
332018, and as of that date is repealed, unless a later enacted statute,
34that is enacted before December 31, 2018, deletes or extends that
35date.

36

SEC. 3.  

The Legislature finds and declares that Section 1 of
37this act, which adds Section 11401.5 of the Insurance Code,
38imposes a limitation on the public’s right of access to the meetings
39of public bodies or the writings of public officials and agencies
40within the meaning of Section 3 of Article I of the California
P6    1Constitution. Pursuant to that constitutional provision, the
2Legislature makes the following findings to demonstrate the interest
3protected by this limitation and the need for protecting that interest:

4In order to protect proprietary information, it is necessary to
5enact legislation that limits the public’s right of access to insurance
6holding company information that is provided pursuant to Section
711401.5 of the Insurance Code.



O

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