BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 41 (Solorio) Hearing Date: June 16, 2010
As Amended: May 27, 2010
Fiscal: Yes
Urgency: No
VOTES: Asm. Floor(01/27/10)44-28/Pass
Asm. Appr. (01/21/10)12-05/Pass
Asm. Ins. (01/06/10)07-04/Pass
SUMMARY Would extend sunset on law requiring reporting of
community development investments by insurers, would revise
methods of compliance with the reporting requirement, and would
impose modified duties on large insurers.
DIGEST
Existing law
1.Defines a community development financial institution for
purposes of the California Organized Investment Network (COIN)
law;
2.Defines community development investment as one in which all
or a portion of the investment has the primary purpose of
community development or that it directly benefits low-income
or moderate-income people in California. Qualifying
investments include community facilities, economic development
that includes job creation, affordable housing, and commercial
properties located in designated areas, and infrastructure
investments for community development;
3.Requires California admitted insurers to provide information
biennially to the Insurance Commissioner on all community
development investments and community development
infrastructure investments they make in the state. This
requirement will sunset on January 1, 2011;
4.Requires the Insurance Commissioner to provide on the
AB 41 (Solorio), Page 2
Department website on a biennial basis information on insurer
investments in the aggregate and provides that insurers making
investments that are innovative, responsive to community or
having other notable hallmarks shall be individually
identified. The Department is also required to provide
information on the Department's website biennially regarding
the aggregate amount of California public debt purchased by
insurers as reported in the NAIC annual statement filings and
other aggregated investment data reported to the NAIC. These
requirements sunset on January 1, 2011.
This bill
1. Would extend until January 1, 2015, the sunset date on the
requirement that insurers report to the Insurance
Commissioner information on their community development
investments, and would require major California insurers to
develop and file with the Insurance Commissioner a policy
statement regarding community development investments;
Specifically, this bill:
a) Would state legislative findings and declarations
regarding the California Organized Investment Network and
the desirability of encouraging additional insurer
investments in community development investments in
traditionally underserved communities;
b) Would require insurers to provide the Insurance
Commissioner with information on their community
development investments by January 1, 2014, rather than
every two years;
c) Would clarify that an insurer which is a member of
an insurance holding company system can comply through a
single filing on behalf of the entire group of affiliated
companies, provided the data so filed accurately reflects
the investments made by each of the affiliates, and
accurately attributes, by NAIC number or other means,
which of the investments were made by each affiliated
company;
d) Would clarify that a community development financial
institution may make the required filing on an insurer's
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behalf if all the following criteria are met:
i. The insurer has no less than a 10
percent ownership interest in a COIN-certified
community development financial institution.
ii. The insurer makes community
development investments in and through the
community development financial institution.
iii. The community development financial
institution accurately files the information
required by paragraph (1) with the commissioner
on behalf of the insurer and accurately
attributes, by NAIC number or other means
required by the commissioner, which investments,
including the dollar amounts of the investments,
were made by each insurer on whose behalf the
community development financial institution is
reporting;
a) Would extend from January 1, 2011 to January 1, 2015
the sunset date on the requirement for insurance
companies to report their community development
investments to the Insurance Commissioner;
b) Would require the Insurance Commissioner by May 31,
2014 to provide information on the Department of
Insurance (DOI) Internet website on the aggregate insurer
community development investments;
c) Would require insurers writing $100 million or more
annually in premiums in California to develop and file
with the Insurance Commissioner no later than July 1,
2011 a policy statement that expresses the goals of the
company regarding community development investments
during the current and the following calendar year;
Would provide that such large insurers are to review the
policy statement on community development investments
every two years and, if the insurer revises or changes
its policy statement, submit the new policy statement to
the commissioner no later than July 1 of each
odd-numbered year and would specify these filings shall
be public information;
Would provide that for these purposes, "policy statement"
means a statement of principle intended to influence a
AB 41 (Solorio), Page 4
decision or action and provides such statement may
include general goals or specific investment goals, but
is not required to do so;
d) Would require the Insurance Commissioner to
establish a link on its Internet website that provides
access to the public of the contents of each insurer's
policy statement and the data on community development
investments made by each insurer writing $100 million or
more in premiums annually in California.
COMMENTS
1. Purpose of the bill To encourage insurance companies to
increase the amount of community development investments
made in California in order to improve the livability and
prosperity of communities while improving the bottom line of
insurers.
2. Background According to the Author, in 2007, the Assembly
Insurance Committee held a hearing on investments in urban
and economically disadvantaged communities. Among the
findings from that hearing were:
a. Banks and public utilities make more community
development investments than insurers but banks and
utilities initially resisted making these investments
as they did not realize the benefits of these
investments. Banks now compete against other
institutions in order to make community development
investments because they are recognized as profitable.
A large number of insurance companies currently have
no investments that would qualify as community
development investments. Some insurers have made
significant community development investments while
others make only minor community development
investments.
b. In 2008, the Department of Insurance released
the findings from a survey of insurers that found that
only 54 of 485 insurance Companies had adopted a
policy regarding community development investments.
According to the Author, an important finding from
that survey is that insurance companies with a
AB 41 (Solorio), Page 5
comprehensive plan and/or specific goals have
significantly increased their community development
investments.
3. Support The California Department of Insurance supports
this bill's extension to 2015 of the current sunset (January
1, 2011) on insurer reporting of community development
investments. The Department notes that unlike the federal
"Community Reinvestment Act" requiring banks to invest in
economically disadvantaged communities, insurers are subject
to no such mandate currently. AB 41 will require insurers
writing $100 million or more in premiums annually in
California to "express their goals for these investments".
Finally, the DOI notes this type of community investments
generate market-based returns to the insurers even as they
benefit low and moderate income families through affordable
housing and business opportunities that create job; during
the present economic times, the resulting projects can
benefit persons seeking employment and small businesses.
4. Opposition None
5. Questions The codified portions of AB 41 make reference
to community development investments and community
development infrastructure investments, both of which are
defined terms under the California Community Investment law.
There are, however, a series of instances where only
community development investments are referenced when it
appears both classes are intended.
For clarity, should the bill be amended to use this
terminology consistently?
6. Suggested Amendments For clarity and consistency of
terminology per the above, it is recommended the May 27th
version of this bill be amended as follows:
a. On page 4, line 30, after "investments",
insert:
"and community development infrastructure
investments"
b. On page 5, lines 30, 32, and 36, after
"investments", insert
AB 41 (Solorio), Page 6
"and community development infrastructure
investments"
c. On page 6, lines 17, 21 and 36, after
"investments", insert
"and community development infrastructure investments"
d. On page 6, line 18, strike "community
development" and insert
"these"
e. and on page 7, line 2, after "investments",
insert
"and community development infrastructure
investments"
7. Prior and Related Legislation
AB 41 is substantially identical to AB 1910 (Coto) of the
2007-08 Session. AB 1910 was approved by the Legislature
then subsequently vetoed by the Governor. The Governor's
veto message said: "The historic delay in passing the
2008-09 State Budget has forced me to prioritize the bills
sent to my desk at the end of the year's legislative
session. Given the delay, I am only signing bills that are
the highest priority for California. This bill does not
meet that standard and I cannot sign it at this time."
This generic veto message was sent in connection with a
significant number of bills in 2008.
POSITIONS
Support
California Department of Insurance
Greenlining Institute
Oppose
None
AB 41 (Solorio), Page 7
Consultant: Kenneth Cooley (916) 651-4102