BILL ANALYSIS �
AB 584
Page 1
Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 584 (Perea and Cooley) - As Amended: April 15, 2013
Policy Committee: InsuranceVote:13
- 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill implements a model law adopted by the National
Association of Insurance Commissioners (NAIC) requiring
insurance companies to implement and report on risk management
practices. Specifically, this bill:
1)Requires insurers to maintain a risk management system to
identify, assess, monitor, manage, and report on material and
relevant risks.
2)Requires insurers to conduct an Own Risk Solvency Assessment
(ORSA) and submit it to the Insurance Commissioner at least
annually.
3)Exempts insurers from the bill if the insurer has less than
$500 million per year in premiums and is part of an insurance
group with less than $1 billion per year in premiums.
4)Provides that the bill takes effect on January 1, 2015.
FISCAL EFFECT
Minor annual costs of approximately $45,000 due to increased
workload for the Department of Insurance. Those costs will be
fully recoverable from insurers.
COMMENTS
Rationale . According to the sponsor, the California Insurance
Commissioner, the near collapse of the American International
Group (AIG) during the 2008 economic crisis revealed the need
AB 584
Page 2
for insurers and insurance groups to better evaluate their
risks. In response, the NAIC adopted the ORSA model law to
establish regulatory oversight needed to assess an insurer's or
insurance group's ability to weather severe economic stress.
This bill protects consumers by helping to make sure insurers
and insurance groups conduct risk assessments every year and
submit them to the Insurance Commissioner. It establishes
enhanced risk management practices and provides the Commissioner
access to information to better understand the risks to which an
insurer or insurance group is exposed.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081