BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 866 (Niello) Hearing Date: July 9, 2009
As Amended: May 12, 2009
Fiscal: Yes
Urgency: No
SUMMARY Revises the due date of the CEA Annual Report from May
1st of each year to August 1st of each year and provides for its
publication on the CEA website.
DIGEST
Existing law
1.Established in 1996 the California Earthquake authority as a
privately financed publicly managed entity regulated as a
monoline private earthquake insurer by the Department of
Insurance (DOI).
2.Provides for CEA oversight via a five-member Governing Board
that includes the Governor, State Treasurer, Insurance
Commissioner, and non-voting representatives of the Speaker of
the Assembly and the Senate Rules Committee.
3.Provides for the CEA to be operated as a private monoline
insurer, regulated by the DOI, including in the matter of rate
approvals, but under the guidance of a governing board that is
obligated to comply with California's open meeting laws.
4.Requires the CEA by May 1st of each year to report to the
legislature and the DOI commissioner on program operations in
a format prescribed by the commissioner. The report is
required to include:
a. The financial condition of the authority
b. A description of all rates and rating plans approved
for use in the authority
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866 (Niello), Page 2
c. An evaluation of the functioning of the authority in
light of its stated purpose of making residential
property insurance and residential earthquake insurance
more available
d. An analysis of the growth by market share of
residential property insurance of participating insurers
compared to nonparticipating insurers
e. Any adverse consequences on the various insurance
distribution systems resulting from the operation of the
authority or alterations in the growth of the residential
property insurance market share between participating
insurers and nonparticipating insurers
f. Any adverse consequences of the various insurance
distribution systems resulting from the operation of the
authority or alterations in the growth of homeowners'
insurance market share between participating insurers and
nonparticipating insurers, and
g. An analysis of any recommended program changes to
permit the authority to better fulfill its stated
purpose.
This bill
1. Revises the date for the submittal of the CEA Annual Report
from May 1 of each year to August 1 of each year.
2. Requires the CEA to make of copy of the annual report
available on the CEA's official website.
COMMENTS
1. Purpose of the bill This Personal Insurance Federation of
California (PIFC), which is this bill's sponsor, state's its
purpose is to revise the date for submittal of the Annual
Report to the Legislature and the Commissioner and to
provide for its broader dissemination via the CEA's internet
website.
2. Background As a publicly managed entity organized to provide
earthquake insurance to Californians, the operations of the
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866 (Niello), Page 3
CEA are important to its customers and potential customers.
3. The CEA is the largest provider of residential earthquake
insurance in the United States. It writes almost 75% of all
residential earthquake insurance polices in force in
California, almost 780,000 policies in 2008.
4. At present, although California public policy strongly
favors the public to consider purchases of earthquake
insurance, and a mandatory offer of earthquake insurance is
required by law when a person purchasers a homeowners policy
and every two years thereafter, only about 7% of California
homeowners buy earthquake insurance.
5. Providing for broader dissemination of the CEA Annual Report
may tend to support greater visibility of the availability
in California of earthquake insurance. And is consistent
with transparency in government.
6. Support Personal Insurance Federation of California (PIFC)
7. Opposition None
8. Questions None
9. Suggested Amendments None
10. Prior Legislation None
POSITIONS
Support
Personal Insurance Federation of California (PIFC)
Oppose
None
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866 (Niello), Page 4
Principal Consultant: Kenneth Cooley (916) 651-4102