BILL ANALYSIS �
AB 480
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 480 (Solorio) - As Introduced: February 15, 2011
SUBJECT : Captive insurers
SUMMARY : Provides that a captive insurer, where authorized by
any law of this state, may issue insurance policies covering
California risks. Specifically, this bill :
1)Provides that nothing in the Insurance Code shall prevent a
captive insurer that meets the requirements of any other
California statute, from issuing policies covering risks in
this state pursuant to the provisions of that statute.
2)Limits the authorization, above, to captive insurers licensed
in at least one state in the United States.
EXISTING LAW :
1)Defines "captive insurer" as an insurance company owned by
another organization with the exclusive purpose to insure
risks of the parent organization and affiliated companies.
2)Provides that landfill operators must provide evidence of
closure and post-closure financial assurance in the event
remediation is required.
3)Authorizes use of admitted, eligible non-admitted, and captive
insurers as one of the financial assurance mechanisms to meet
the closure and post-closure requirements.
4)Limits the captive insurers that are eligible to satisfy the
financial assurance requirements to those insurers that:
a) Meet specified federal requirements.
b) Is domiciled in the United States and licensed in
its state of domicile to write the type of insurance
required.
c) Provides insurance only to the landfill operator
that has established the insurer and does not market its
AB 480
Page 2
services to other parties.
d) Has a rating from A.M. Best of A- or better.
5)Requires, generally, that insurers be licensed in this state
before issuing policies to cover California risks, but allows
non-admitted insurers to issue policies where the licensed
insurers are not providing that type of insurance.
6)Requires, generally, that nonadmitted insurers be on a list of
eligible surplus lines insurers before issuing policies
covering California risks.
7)Requires, by regulation, that only admitted and eligible
nonadmitted insurers may provide coverage to satisfy the
closure and post-closure financial responsibility requirements
for landfill operators.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . This bill was introduced to attempt to address a
regulation that was adopted by the California Integrated Waste
Management Board, and its successor state agency CalRecycle,
that appears to conflict with express statutory authorization
allowing the use of certain captive insurers for the closure
and post-closure financial assurance requirements of landfill
operators. The regulation, Title 27, California Code of
Regulations, Section 22248, appears to ignore the express
terms of Section 43601 of the Public Resources Code by
imposing an impossible condition on the use of captive
insurers. Specifically, under the Department of Insurance
rules, a captive insurer cannot be placed on the list of
eligible surplus line insurers, yet the regulation mandates
that the captive insurer be on the list.
2)Hazardous materials landfills . While CalRecycle is
responsible for regular landfills, the Department of Toxic
Substances Control regulates hazardous materials landfills.
Under the DTSC's rules, captive insurers are eligible to
provide closure and post-closure financial assurance, and
there are currently policies in force in California by captive
insurers providing closure and post-closure financial
assurance for hazardous materials landfills.
AB 480
Page 3
3)Prior legislation . AB 715 (Figueroa) of 1998 (Statutes 1998,
Chapter 978) enacted the rules governing captive insurance and
landfills. The express purpose of AB 715 was to overcome a
pre-existing regulation that precluded use of the captive
insurer mechanism. Relying on federal law that authorizes use
of a captive insurer for these purposes, AB 715 built on the
federal requirements and added additional financial safeguards
beyond the federal law's requirements.
4)The federal government has reaffirmed use of captive insurers .
In 2006-2007, the federal Environmental Protection Agency
undertook a re-examination of the various financial mechanisms
that it authorizes for satisfaction of closure and
post-closure financial assurance obligations. After that
examination, it was reaffirmed that both captive and
commercial insurers should be treated equally for these
purposes, provided that the captive insurer meets certain
regulatory requirements (such as the regulatory requirements
in Vermont, where most captive insurers are domiciled).
5)Support . Supporters argue that captive insurers are a
well-accepted risk management mechanism that are used in
numerous industries in every state in the country. Use of a
captive insurer allows a diversification of risk financing,
promotes superior risk and claims management, and enhances
access to the reinsurance markets.
REGISTERED SUPPORT / OPPOSITION :
Support
Vermont Captive Insurer Association
Waste Management
Superfund Settlements Project
RCRA Corrective Action Project
Opposition
None received.
AB 480
Page 4
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086