BILL ANALYSIS �
AB 315
Page 1
Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 315 (Solorio) - As Amended: May 5, 2011
Policy Committee: InsuranceVote:12
- 0
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill conforms California surplus line insurance regulatory
and tax laws to recent federal financial reform law.
Specifically, this bill:
1)Repeals the requirement that, in most circumstances, prohibits
placement of insurance with a nonadmitted insurer unless that
insurer is on the List of Eligible Surplus Line Insurers
(LESLI List).
2)Repeals the substantive criteria necessary for an insurer to
be placed on the LESLI List, but readopts similar criteria for
placement on a voluntary list of acceptable insurers.
3)Establishes the financial requirements that a nonadmitted
insurer not on the voluntary list must meet in order for a
surplus line broker to place insurance with that insurer.
4)Provides that the bill is an urgency statute, to take effect
immediately.
FISCAL EFFECT
1)Unknown tax revenue impact that could result in the gain or
loss of millions of dollars in tax revenue.
The Franchise Tax Board notes that this legislation will
impact the amount of "nonadmitted insurance tax" (NIT) that is
collected. Currently, FTB collects approximately $10 million
annually. According to their analysis, the impact on this bill
AB 315
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is the difference between the additional taxes assessed on
taxpayers with California home state insured policies that
include out-of-state insurance, at 100 % of total premiums,
and the reduction of taxes assessed on policies that have a
California insurance component but which would not be subject
to tax because they do not meet the definition of a home state
policy.
2)Administrative costs associated with this legislation are
minor and absorbable within the Department of Insurance's
(DOI) resources.
COMMENTS
Purpose . According to the sponsor of the bill, DOI, AB 315 is
intended to conform California law to the Nonadmitted and
Reinsurance Reform Act ("NRRA") that is part of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, enacted
last year by the federal government. That federal act included
provisions to add uniformity and simplicity to the states'
regulatory laws governing the placement of surplus line
insurance, and collection of the surplus line tax. It pre-empts
certain regulatory requirements of California law, but more
importantly, unless conforming law is enacted by July 21 of this
year, California's authority to collect the surplus line tax
would also be limited.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081