CA Bill Will Align State Law with Federal Law and NAIC Model Law and Regulations
Sacramento, CA (WorkersCompensation.com) - Insurance Commissioner Dave Jones today announced that the California State Legislature has passed SB 1216, authored by Senator Alan Lowenthal (D-Long Beach), with unanimous bipartisan support. The bill is sponsored by Commissioner Jones and the California Department of Insurance, and updates California insurance law in response to changes in federal law and revisions in the National Association of Insurance Commissioners (NAIC) Model Laws and Regulations.
"I am pleased that the State Legislature has passed this important bill." Commissioner Jones said. "Globalization has resulted in many changes to the business practices of insurance and SB 1216 will ensure that the Insurance Commissioner and the Department of Insurance have the authority and regulatory tools needed to protect consumers in response to the changing business practices in the area of reinsurance."
"I want California to be a safe place for both consumers and for businesses. SB 1216 proves that the rights of consumers and business growth do not have to be mutually exclusive," said Senator Alan Lowenthal. "It is a critical step in helping California conform to Dodd-Frank regarding reinsurance, while offering what I believe are critical protections for both consumers and businesses."
SB 1216 will align existing California insurance law related to credit for reinsurance to that of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) and NAIC Reinsurance Model Law and Regulations with some further enhancements. Reinsurance is insurance purchased by an insurer from another insurer for all or a portion of loss that may arise under one or more of the insurer's policies. Since reinsurance involves a transfer of liability company to company, it is often used by insurance companies as a risk management tool. Policyholders are generally unaware of the reinsurance transaction and any direct action they may have on the policy remains with the original insurer.
The NAIC's recently amended reinsurance Models reflect efforts by the states to modernize reinsurance regulation, including responding to Dodd-Frank changes. A key provision of the NAIC changes relates to the certification of a non-admitted reinsurer. Under the revised NAIC Models, each state has the authority to certify a reinsurer or to recognize the certification issued by another NAIC - accredited state. As part of the certification process, a rating system provides for certified non-U.S. - based reinsurers to reduce collateral under specified conditions. The certification process is pivotal to permit a California domiciled ceding insurer to qualify for a credit on its financial statement under these new conditions.
SB 1216 now goes to Governor Jerry Brown for his consideration.
"I urge Governor Jerry Brown to sign this bill that will enable the Department of Insurance to continue to protect California consumers to the best of our ability," Jones said.