BILL ANALYSIS �
SENATE INSURANCE COMMITTEE
Senator William W. Monning, Chair
AB 2128 (Gordon) Hearing Date: June 11, 2014
As Amended: March 19, 2014
Fiscal: Yes
Urgency: No
VOTES: Asm. Floor (04/21/14)55-22/Pass
Asm. Appr. (04/09/14)12-05/Pass
Asm. Ins. (04/02/14) 09-03/Pass
SUMMARY Would extend the sunset clauses on the community
development investment program within the California Department
of Insurance (CDI).
DIGEST
Existing law
1. Establishes the California Organized Investment Network (COIN)
within the CDI, with the purpose of encouraging insurers to
invest in community development investments.
2. Declares that it is the policy of this state that:
a. Insurers should be supportive of community development
investments and should, where practical, consider making
these investments; and
b. COIN should pursue active measures to encourage insurers
to make community development investments.
3. Defines "community development investments" as investments
where all or part of the investment has as its primary purpose
community development for, or that directly benefits, California
low or moderate income individuals, families, or communities.
AB 2128 (Gordon), Page 2
4. Establishes an Advisory Board to recommend to the Insurance
Commissioner (IC) how the COIN program should operate, but
sunsets the Board on January 1, 2015.
5. Requires the Board to meet quarterly.
6. Provides that COIN shall allocate a program of tax credits to
institutions that make investments in Community Development
Financial Institutions (CDFI), as defined. Currently, tax
credits of 20% are allocable by COIN for investments up to $50
million.
7. Requires insurers to file data with the IC concerning the
community development investments the insurers make in
California, but sunsets this obligation on January 1, 2015.
8. Requires the IC, by May 31, 2014, to provide information on the
CDI website relating to insurers' community development
investments.
This bill
1. Extends to January 1, 2020, the sunset date on the
provisions of law that define the scope of the Insurance
Commissioner's obligations to report on community
development investments and green investments, as defined.
2. Extends to January 1, 2020, the sunset date on the
California Organized Investment Advisory Board.
3. Authorizes the Board to meet three or more times per year.
4. Removes language the staggering of terms for the Board's
initial members and provides gives the IC the discretion to
extend or reduce those terms.
AB 2128 (Gordon), Page 3
COMMENTS
1. Purpose of the bill According to the author, AB 2128 would
extend provisions scheduled to sunset and clarify provisions
relative to the COIN Advisory Board based on the Insurance
Commissioner's experience and recommendations.
2. Background . The California Organized Investment Network
(COIN) Program was created in 1996 as a public/private
partnership between the California Department of Insurance
(CDI), the insurance industry, state government leaders, and
community development organizations. COIN's goal is to help
address unmet capital needs that support investments in
economic development and affordable housing in low-income
urban and rural communities throughout California. The
program serves as a liaison between insurers that are
seeking investment opportunities and the community
organizations that are seeking investment capital for
projects.
COIN Qualified Investments. COIN Qualified investments are
insurer investments verified by COIN to provide a positive
environmental or social impact to low-to-moderate income
(LMI) households or areas, as well as rural communities in
California. These include:
High Impact Investments are investments sourced and/or
structured by COIN for insurers, or insurer investments COIN
deems innovative, responsive to community needs, not
routinely provided by insurers, or have a high degree of
positive impact on the economic welfare of LMI households or
areas in California. To encourage investment, COIN notifies
insurers by email of particular investments vetted by COIN
investment officers. In 2012, a total of four High Impact
Investment Bulletins were approved by COIN and marketed to
all 1,044 insurers. Only one was funded by insurers.
Community Development Financial Institution (CDFI) Tax
Credit Investments. COIN also operates the CDFI program
that provides tax credits to insuers thatinvest in community
AB 2128 (Gordon), Page 4
development organization. Investments are equity,
equity-like debt instruments, and 0% interest deposits
invested into a COIN certified CDFI. CDFIs must be
affiliated with a private financial institution located in
California, have as their primary mission community
development, and focus their lending in urban, rural and/or
reservation-based California communities. Each year, COIN
allocates a state tax credit of 20% on qualified investments
with a minimum value of $50,000 and duration of 60 months.
The total annual available COIN CDFI tax credit is $10
million, which leverages up to $50 million of private
investment into COIN certified CDFIs. The CDFI Tax Credit
Program received $8.3 million in funding from 15 insurers in
2012.
COIN also reviews other types of investments, including
green investments emphasize renewable energy projects,
affordable housing focused on infill sites, and economic
development; rural Investments made in areas of California
with a population of 50,000 or fewer people and not
contiguous to an urban area; community development
investments like affordable housing; and community
development infrastructure investments including all debt
issued by the State of California or local agency that has
as its primary purpose in funding community development or
that directly benefits LMI communities
COIN Data Calls. In order to track insurer COIN
investments, existing law required insurers to provide
information, by January 1, 2014, on all of its community
investments and community development infrastructure
investments in California. The California Department of
Insurance (CDI) posts aggregate data on its website as
reproduced below. CDI also makes raw data regarding
specific insurers available as well.
---------------------------------------------------------
| | | | | |
| | | | | |
|Investment |2009 | 2010 |2011 |2012 |
|Holdings | | | | |
|-------------+----------+----------+----------+----------|
| | | | | |
AB 2128 (Gordon), Page 5
| | | | | |
|CA Public |$9,172,642|$7,402,140|$5,311,324|$7,804,801|
|Debt |,100 |,145 |,978 |,157 |
|-------------+----------+----------+----------+----------|
| | | | | |
| | | | | |
|Total |$13,368,33|$14,938,48|$20,042,77|$22,192,23|
|California |1,985 |0,695 |3,831 |2,651 |
|Investments | | | | |
---------------------------------------------------------
Industry representatives expressed frustration that the data
provided has not produced a comprehensive analysis of the
industry's performance. Without in-depth analysis, some
industry representative believe that further data calls are
unnecessary.
For the purposes of this bill, discussions between the
author, stakeholders, and the committee depended on the
analysis of data submitted in January that was supposed to
be published in a report due in May.
The CDI issued a preliminary report in early June. Based on
that report, it was not clear how the data collected served
a significant public purpose. The data did not help to
identify communities in specific need, nor provide guidance
as to how to improve the program or community investments in
general (it does not distinguish between investments made
because of the program and those that would have been made
anyway).
The report did raise concerns that dedicating COIN staff to
collecting and verifying data diverts staff from identifying
worthy community investments and recruiting investors.
A final report is expected later this year.
Advisory Board. The COIN advisory board membership is
specified in statute, and it is directed to meet quarterly.
One of the bill's goals is to add some flexibility to the
AB 2128 (Gordon), Page 6
functioning of the Board by allowing it to meet as few as
three times per year, but more often if it so desires, on a
schedule that is determined in its own discretion. The
Board is composed of the Insurance Commissioner or his or
her designee, three executives in the insurance investment
industry, and several volunteers as specified. The Senate
Rules Committee and the Speaker of the Assembly each appoint
one member. The purpose of the board is to advise COIN on
the best methods of increasing the level of insurance
industry capital; facilitate contact among industry
executives, community-based organizations, and CDFIs; and
recommend programmatic guidelines.
Community Development Investment Policy Statements (CDIPS).
Insurers collecting more than $100 million in premiums from
Californians must file a policy statement detailing that
company's goals for community development and infrastructure
investments in underserved communities ("CDIPS"). CDIPS
include a statement of investment principle or guidelines
related to the determination of investment decisions.
Insurers were required to submit their CDIP and other
information to COIN in 2013. A review of 113 unique
community development investment policy statements
determined the following:
a. 17 insurers do not currently make investment in
community development investments or community
development infrastructure investments.
b. 16 insurers provided specific information on the
community development investments and community
development infrastructure investments they currently
invest in.
c. 13 insurers utilize outside investment managers.
d. Nine insurers provided contact information for
investment staff.
e. Six insurers provided specific goals for community
development investments and community development
AB 2128 (Gordon), Page 7
infrastructure investments.
f. Three insurers do not have goals to make
investment in community development investments or
community development infrastructure investments.
Individual CDIPs are posted on COIN's Website.
3. Arguments in Support.
Housing California explains that COIN was established in
1996 in lieu of a mandatory investment (as required of banks
under the federal Community Reinvestment Act) and that
COIN's reporting function allows regulators and the public
to track which insurers provide benefits back to the
communities from which they receive revenue. AB 2128 would
maintain this valuable spotlight.
4. Arguments in Opposition
None received.
5. Questions
Although not opposed to the bill, industry representatives
have asked what constitutes an acceptable level of community
investment? Should it be measured by the number of insurers
making investments, by a specific dollar amount of
investments, or the success of the insurers making
investments?
6. Suggested Amendments
The author, sponsor, and industry have come to an agreement
on amendments that focus program efforts to development of
outreach efforts and investment opportunities by narrowing
the scope of the data call and providing the program an
opportunity. Based on that understanding, the committee may
wish to consider amendments that would do the following:
a. Raise the threshold of companys required to report
from all insurers to only those with $100 million in
AB 2128 (Gordon), Page 8
written premium. Insures must highlight green, rural,
and high impact investments. Smaller companies may
voluntarily comply.
b. Eliminate further filing of CDIPs.
c. Add another data call so that insurers must report
to COIN by January 1, 2017, for calendar years 2013,
2014, and 2015.
d. Require COIN to post a report on its website by
November 1, 2017 regarding the data collected and on
enhanced COIN activities, including but not limited to,
outreach efforts and investments identified and placed
through the COIN program, up to the date of publication.
1. Prior and Related Legislation
a. Chapter 436, Statutes 2011 (AB 624, J. Perez),
authorized the establishment of the COIN Advisory Board.
b. Chapter 418, Statutes 2010 (AB 1011, Jones),
expanded definitions to include green investments and
added the green investment posting requirement.
c. Chapter 340, Statutes 2010 (AB 41, Solorio),
established the requirement on insurers to submit a
policy statement on community development investments.
Also, extended the sunset date on the requirement that
insurers submit information to the Department of
Insurance regarding their community investment
activities.
d. AB 1910 (Coto, 2008), would have established the
AB 2128 (Gordon), Page 9
requirement on insurers to submit a policy statement on
community development investments. Vetoed.
e. Chapter 456, Statutes 2006 (AB 925, Ridley-Thomas),
required insurers to submit information to the
Department of Insurance regarding their community
investment activities.
POSITIONS
Support
Capital Impact Partners
Community Loan Fund
Faith Based Federal Credit Union
Genesis LA Economic Growth Corporation
Housing California
Housing Trust Silicon Valley
Mercy Housing
Nehemiah Corporation of America
Neighborhood Housing Services Silicon Valley
Pacific Community Ventures
Pacific Compensation Insurance Company
Roxborough, Pomerance, Nye, & Adreani
Rural Community Assistance Corporation
Oppose
None received.
Consultant: Hugh Slayden (916) 651-4773