BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2327|
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CONSENT
Bill No: AB 2327
Author: Harkey (R), et al
Amended: 6/21/10 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 10-0, 6/30/10
AYES: Calderon, Cogdill, Correa, Florez, Kehoe, Liu,
Lowenthal, Padilla, Price, Runner
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 63-0, 5/28/10 (Consent) - See last page
for vote
SUBJECT : Affordable housing: risk retention pool
SOURCE : Housing Authorities Risk Retention Pool
DIGEST : This bill authorizes an affordable housing
entity to join with one or more affordable housing entities
in an arrangement providing for the pooling of self-insured
claims or losses, as specified.
ANALYSIS :
Existing law :
1. Authorizes local agencies to enter into a joint pooling
agreement to form a single statewide insurance pooling
CONTINUED
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arrangement for the payment of tort liability or public
liability losses incurred by those agencies. The agency
is known as the Local Agency Self-Insurance Authority.
2. Authorizes local public agencies to self-insure against
liability for injury resulting from an act or omission
of their employees in the scope of their employment.
3. Authorizes two or more local public entities, by a joint
powers agreement, to provide insurance through
self-insurance, or from an admitted insurer, or from a
nonadmitted insurer when obtained through a surplus
lines broker.
4. Specifies that the pooling of self-insured claims or
losses among local public entities is not considered
insurance and is not subject to regulation by the
Insurance Commissioner.
5. Authorizes two or more public agencies by agreement to
jointly exercise any power common to the contracting
powers, even though one or more of the contracting
agencies are located outside this state.
This bill:
1. Authorizes an affordable housing entity to join with one
or more other affordable housing entities in an
arrangement providing for the pooling of self-insured
claims or losses with respect to any of the following:
A. Insurance covering all or any part of any tort
liability.
B. Insurance covering any employee of the
affordable housing entity against all or any part
of his or her liability for injury resulting from
an act or omission in the scope of employment.
B. Insurance covering any board member, officer,
partner, manager, member, or volunteer of the
affordable housing entity against any liability
that may arise from any act or omission in the
scope of participation with the affordable housing
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entity.
C Insurance covering any loss arising from
physical damage to motor vehicles, personal
property, real property, or other property owned or
operated by the affordable housing entity.
2. Specifies the pooling arrangement established by this
bill arel not be considered insurance.
3. Requires all affordable housing entities participating
in a pooling arrangement be given written notice, in at
least 10-point type, that the pool is not regulated by
the Insurance Commissioner and that the state insurance
insolvency guaranty funds are not available to safeguard
its risk.
4. Provides any insurance pool may be organized as a
nonprofit corporation, limited liability company,
partnership, or trust, whether organized under the laws
of this state or another state or operating in another
state.
5. Requires any insurance pool have initial pooled
resources of not less than $2,500,000 in the form of
cash or cash equivalents.
6. Requires any insurance pool maintain adequate
reinsurance to protect against its risks.
7. Requires any insurance pool furnish a copy of the pool's
annual audited financial statement and most recent
actuarial review, by first class mail or by any other
method of delivery, including electronic transmission,
to the Assembly Committee on Housing and Community
Development, the Assembly Committee on Insurance, the
Senate Committee on Banking, Finance, and Insurance, and
the Senate Committee on Transportation and Housing
within 180 days of the close of the pool's fiscal year.
If, in the period of time since the last submittal any
of the following has occurred, the transmittal letter
accompanying the annual audited financial statement and
most recent actuarial review shall so indicate and shall
provide a brief description of each matter:
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A. There has been a change to the pool's plan of
financing, management, or operation, including any
material amendment to any of those plans.
B. A claims audit report has been filed with any
regulatory body with respect to the pool.
C. A report of examination issued by any regulatory
body with respect to the pool has been received.
D. There has been a material change in the scope of
the regulation of the pool by other states in which
the pool operates.
8. Requires all participating affordable housing entities
in any insurance pool to agree to pay premiums or make
other mandatory financial contributions, as determined
by the governing board, provided for by the insurance
pool arrangement, that are necessary to ensure a
financially sound risk pool.
9. Prohibits these insurance pools from insuring against
workers' compensation liability.
10.Specifies that nothing in this bill shall be construed
to authorize an affordable housing entity to pay or
insure for any claim or judgment against an employee of
the affordable housing entity for punitive or exemplary
damages.
11.Defines "affordable housing entity as specified"
Comments
Public housing authorities have the ability to join
together in multi-state joint self-insurance risk pools to
manage property and liability risks, jointly purchase
insurance or reinsurance, and to contract for risk
management, claims, and administrative services in order to
conserve scarce resources. These pools are limited to
participation by public entities.
Affordable housing is increasingly being developed by tax
credit limited partnerships, limited liability companies,
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and nonprofit corporations. Public housing projects are
being transferred to these entities (a process called
"de-federalization") because of HUD's asset management
restrictions and the decrease in HUD capital funds and
moneys for operating subsidies.
When a tax-credit limited partnership develops affordable
housing, either housing authority or a nonprofit
corporation acts as the general partner, and institutional
financing sources become the limited partners. Nonprofit
corporations have become more active in the development of
affordable housing because they have access to funding
sources that may not be available to public housing
authorities.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/4/10)
Housing Authorities Risk Retention Pool (source)
California Coalition for Rural Housing
Housing Authority of the County of Alameda
Housing Authority of the County of Monterey
ARGUMENTS IN SUPPORT : The bill's sponsor, the Housing
Authorities Risk Retention Pool (HARRP), is a California
joint powers authority that operates as a self-insurance
pool comprised of over 90 public housing authorities from
Oregon, Washington, California and Nevada. HAARP is
limited to insuring property where a housing authority is
the sole owner, a situation that is increasingly rare. The
HARRP argues that California needs to update its statutes
to permit other types of entities that develop, acquire, or
manage affordable housing to establish cost-efficient,
multi-state insurance risk pools as a way to maintain the
availability of affordable housing in this state.
According to the sponsor, California affordable housing
entities will benefit from the ability to become a member
of a multi-state self-insurance pool. The ability to
provide low cost insurance, broadened coverage, and
effective risk management tailored to affordable housing
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risk exposures translates into more abundant affordable
housing for California residents without any new government
expenditures.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Block,
Blumenfield, Bradford, Brownley, Buchanan, Caballero,
Charles Calderon, Conway, Cook, Coto, Davis, DeVore, Eng,
Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Gaines,
Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jones, Knight, Lieu,
Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,
Nava, Nestande, Niello, Nielsen, Norby, V. Manuel Perez,
Portantino, Ruskin, Saldana, Skinner, Solorio, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, John
A. Perez
NO VOTE RECORDED: Bass, Bill Berryhill, Tom Berryhill,
Blakeslee, Carter, Chesbro, De La Torre, De Leon,
Emmerson, Furutani, Hall, Jeffries, Salas, Silva, Smyth,
Audra Strickland, Vacancy
JJA:do 8/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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