BILL ANALYSIS
AB 2781
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Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2781 (Committee on Insurance) - As Introduced: March 3,
2010
Policy Committee:
InsuranceVote:12-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill extends the sunset date for California Insurance
Guarantee Association (CIGA) authority to issue bonds for the
purpose of covering workers' compensation reinsurance claims
from January 1, 2011 to January 1, 2013.
FISCAL EFFECT
No direct fiscal impact. CIGA, fully funded by private workers'
compensation premiums, will likely not use the authority created
by the bill.
COMMENTS
1)Rationale. This bill extends CIGA bond authority created by
workers' compensation reforms contained in AB 227 (Vargas)
Chapter 635, Statutes of 2003, which authorized the sale of up
to $1.5 billion in bonds to raise the needed funds to continue
to pay and discharge worker's compensation claims.
2)Background . All California employers must provide workers'
compensation benefits to their employees under state labor
law. Employers must purchase workers' compensation insurance
from either a licensed insurance company or the State
Compensation Insurance Fund (SCIF) or employers may choose to
self-insure, which means they use a "pay-as-you go" model,
paying benefits to and on behalf of workers as the costs are
incurred.
When purchasing coverage from a private insurance company, a
AB 2781
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surcharge is embedded in the premium to include CIGA coverage,
which protects the insured in cases when an insurance company
becomes insolvent. CIGA provides a mechanism of coverage for
paying claims of insolvent insurance companies.
3)Related Legislation . AB 3055 (Committee on Insurance), Chapter
80, Statutes of 2008 extended the sunset of AB 227. AB 227
established the original bond authority addressed in AB 2781.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081