BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1407|
|Office of Senate Floor Analyses | |
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CONSENT
Bill No: SB 1407
Author: Senate Banking, Finance and Insurance Committee
Amended: 4/12/10
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 9-0, 4/21/10
AYES: Calderon, Cogdill, Correa, Florez, Kehoe, Lowenthal,
Padilla, Price, Runner
NO VOTE RECORDED: Cox, Liu
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : State Compensation Insurance Fund
SOURCE : State Compensation Insurance Fund
DIGEST : This bill provides that the State Compensation
Insurance Fund may invest its excess funds in a manner
similar to private insurance carriers, subject to specified
exceptions.
ANALYSIS :
Existing law:
1. Provides that liability for an injured worker covered
under the workers' compensation system is determined
"irrespective of the fault of any party".
2. Specifies that coverage is based on defined employment
CONTINUED
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relationships so every employer in California must
either carry workers' compensation insurance or obtain a
certificate of self-insurance.
3. Authorizes insurance to be obtained privately, through
private insurance carriers licensed and admitted to
provide workers' compensation insurance in California or
through the state's own insurance fund, the State
Compensation Insurance Fund (SCIF), a quasi-governmental
entity.
4. Provides that as an insurance provider, SCIF is
administered by an independent board of directors for
the purpose of providing workers compensation insurance.
5. Specifies that all moneys that are in excess of SCIF's
current requirements can "be invested and reinvested,
from time to time, in the same manner as provided for
private insurance carriers" pursuant to specified
provisions of law.
6. Authorizes private insurance carriers, other than SCIF,
a broad variety of specific investment categories which
are allowed for making excess fund investments.
This bill:
1. Authorizes SCIF to invest its excess monies under the
Excess Funds Investment law applicable to private
insurance carriers subject, however, to withholding
investment authorization by SCIF in the following
classes of investment:
A. Investments in corporate stock (Section 1191 of
the Insurance Code [INS]).
B. Exchange traded call options on common stock (INS
Section 1191.1).
C. Call options on interest-bearing federal home loan
securities (INS Section 1191.5).
D. Loans secured by first liens on unencumbered
leaseholds (INS Section 1192.2).
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E. Investments in Canadian corporations(INS Section
1192.4).
F. Investments in mortgages or mortgage-backed
securities (INS Section 1192.6).
G. Investments in participation certificates in
interest-bearing corporate debt (INS Section 1192.7).
H. Shares in an investment company specified in the
Federal Investment Company Act of 1940 (INS Section
1192.9).
I. Investment in investment pools and cash management
pools (INS Section 1192.95 ).
J. Securities of an unaffiliated business entity (INS
Section 1192.10 ).
K. Federal home loan bank stock (INS Section 1194.7).
L. Investments in real estate and leases (INS Section
1194.8).
M. Notes or bonds secured by a mortgage or other
first lien on unencumbered real property (INS Section
1194.81).
N. Notes or bonds secured by a mortgage or other
second lien on encumbered real property (INS Section
1194.82).
O. Corporate stock (INS Section 1198).
P. Corporate stock of a single corporation (INS
Section 1199).
Prior and Related Legislation
AB 616 (Ellis), Chapter 738, Statutes of 1979, enacted the
SCIF investment statute which SB 1407 modifies. The
Legislative Counsel Digest of the 1979 bill stated that
"Existing law provides that excess fund monies (of SCIF)
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may be invested in securities authorized for investments by
savings banks. This bill would instead permit the fund to
invest such excess funds in the same manner provided for
private insurance carriers."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/4/10)
State Compensation Insurance Fund (source)
ARGUMENTS IN SUPPORT : According to SCIF, the bill's
sponsor, this bill will align the language of the SCIF law
with the understanding that has prevailed since 1980 that
its authority to invest excess funds is generally like that
of private insurance carriers and other state workers'
compensation funds.
JJA:mw 5/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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