BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2128|
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THIRD READING
Bill No: AB 2128
Author: Gordon (D)
Amended: 8/4/14 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 8-2, 6/25/14
AYES: Monning, Corbett, Correa, DeSaulnier, Lieu, Mitchell,
Roth, Torres
NOES: Nielsen, Vidak
NO VOTE RECORDED: Gaines
SENATE APPROPRIATIONS COMMITTEE : 5-2, 8/11/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
ASSEMBLY FLOOR : 55-22, 4/21/14 - See last page for vote
SUBJECT : Insurer investments: community development
SOURCE : Department of Insurance
DIGEST : This bill makes various changes to the California
Organized Investment Network (COIN) program within the
Department of Insurance (CDI).
ANALYSIS :
Existing law:
1.Establishes COIN within CDI, with the purpose of encouraging
CONTINUED
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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.
1.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.
2.Establishes an Advisory Board (Board) to recommend to the
Insurance Commissioner (IC) how COIN program should operate,
but sunsets the Board on January 1, 2015.
3.Requires the Board to meet quarterly.
4.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.
5.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.
6.Requires the IC, by May 31, 2014, to provide information on
the CDI Internet Web site relating to insurers' community
development investments.
7.Requires each insurer admitted in California that writes
premium in California equal to or in excess of $100,000,000
annually to develop, and file with the IC no later than July
1, 2011, a policy statement on community development
investments and community development infrastructure
investments that expresses the insurer's goals for those
investments during the filing year and following calendar
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year.
8.Specifies that each insurer that these provisions apply to is
required to biennially review its policy statement, and, if
the insurer revises or changes its policy statement, submit
the new policy statement to the IC no later than July 1, of
each odd-numbered year.
This bill:
1.Revises and recasts provisions of COIN, and instead requires
each admitted insurer with annual premiums written in
California equal to or in excess of $100,000,000 for any
reporting year to provide information to the IC on all of its
community development investments, community development
infrastructure investments, and green investments in
California, and requires the information be reported by July
1, 2016.
2.Revises the information that the IC and CDI are required to
provide on the CDI's Internet Web site by including
information on the actions taken by COIN to analyze the data
by insurers for the purpose of creating and identifying
potential investment opportunities, as specified.
3.Extends CDI's Internet Web site publication date from May 31,
2014, to December 31, 2016, inclusive, and deletes the
biennial publication requirement for green investments and
instead requires a publication deadline of
December 31, 2016.
4.Deletes provisions requiring a biennial review by each insurer
of its policy statement and the submission of a new policy
statement if there is a revision or change.
5.Deletes the Board's staggered term requirement, and extends
its sunset date until January 1, 2020.
Background
The COIN Program was created in 1996 as a public/private
partnership between CDI, the insurance industry, state
government leaders, and community development organizations.
COIN's goal is to help address unmet capital needs that support
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investments in economic development and affordable housing in
low-income urban and rural communities throughout California.
COIN 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 e-mail 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.
CDFI Tax Credit Investments . COIN also operates the CDFI
program that provides tax credits to insurers that invest in
community 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;
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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.
CDI posts aggregate data on its Internet Web site as reproduced
below. CDI also makes raw data regarding specific insurers
available as well.
---------------------------------------------------------------
|Investment |2009 |2010 |2011 |2012 |
|Holdings | | | | |
|-----------+------------+------------+------------+------------|
|CA Public |$9,172,642,1|$7,402,140,1|$5,311,324,9|$7,804,801,1|
|Debt |00 |45 |78 |57 |
|-----------+------------+------------+------------+------------|
|Total |$13,368,331,|$14,938,480,|$20,042,773,|$22,192,232,|
|California |985 |695 |831 |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 representatives believe that further data calls are
unnecessary.
For the purposes of this bill, discussions between the author,
stakeholders, and the Senate Insurance Committee depended on the
analysis of data submitted in January that was supposed to be
published in a report due in May.
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
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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 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 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
IC or his/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 CDIPs in underserved communities. 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:
17 insurers do not currently make investment in community
development investments or community development
infrastructure investments.
16 insurers provided specific information on the community
development investments and community development
infrastructure investments they currently invest in.
13 insurers utilize outside investment managers.
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9 insurers provided contact information for investment staff.
6 insurers provided specific goals for community development
investments and community development infrastructure
investments.
3 insurers do not have goals to make investment in community
development investments or community development
infrastructure investments.
Individual CDIPs are posted on COIN's Internet Web site.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Administrative costs of approximately $87,500 (Special Fund)
CDI indicates costs of about $80,000 to aggregate the data
reported by insurers and post on CDI's Internet Web site. An
additional $7,500 annually will result from costs associated
with the Board meetings.
SUPPORT : (Verified 8/11/14)
Department of Insurance (source)
Capital Impact Partners
Community Loan Fund
Genesis LA Economic Growth Corporation
Housing California
Mercy Housing
Nehemiah Corporation of America
Neighborhood Housing Services Silicon Valley
Roxborough, Pomerance, Nye, & Adreani
Rural Community Assistance Corporation
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.
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ASSEMBLY FLOOR : 55-22, 4/21/14
AYES: Alejo, Ammiano, Atkins, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Cooley, Dababneh, Daly, Dickinson, Eggman, Fong, Fox,
Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall,
Roger Hern�ndez, Holden, Jones-Sawyer, Levine, Lowenthal,
Medina, Mullin, Muratsuchi, Nazarian, Pan, Perea, V. Manuel
P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez,
Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams,
Yamada, John A. P�rez
NOES: Achadjian, Allen, Bigelow, Ch�vez, Conway, Dahle,
Donnelly, Beth Gaines, Gorell, Grove, Hagman, Harkey, Jones,
Linder, Maienschein, Mansoor, Nestande, Olsen, Patterson,
Wagner, Waldron, Wilk
NO VOTE RECORDED: Logue, Melendez, Vacancy
AL:e 8/12/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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