Bill Text: CA AB2303 | 2011-2012 | Regular Session | Introduced
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California Assembly Bill 2303 (Prior Session Legislation)
Bill Title: Insurance omnibus. [Track Bill]
Status: 2012-09-29 - Chaptered by Secretary of State - Chapter 786, Statutes of 2012. [AB2303 Detail]
BILL NUMBER: AB 2303 INTRODUCED BILL TEXT INTRODUCED BY Committee on Insurance (Solorio (Chair), Bradford, Carter, Feuer, Hayashi, Torres, and Wieckowski) FEBRUARY 24, 2012 An act to amend Sections 100, 661, 700.04, 923.6, 985, 1011, 1012, 1016, 1022, 1061, 1063, 1070.6, 1851, 1864, 12100, and 12962 of, to add Section 1011.1 to, to repeal Sections 117 and 12961 of, and to repeal Chapter 2 (commencing with Section 12420) of Part 6 of Division 2 of, the Insurance Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGEST AB 2303, as introduced, Committee on Insurance. Insurance omnibus. (1) Existing law regulates mortgage insurance and defines it as including guaranteeing of the payment of the principal, interest, and other sums agreed to be paid under the terms of any note or bond secured by mortgage, or other sums secured under the terms of the mortgage, in its entirety, or of any undivided or other partial interest in the mortgage, or in a group of mortgages, and the guaranteeing or insuring, directly or indirectly, against loss thereon. This bill would prohibit mortgage insurance from being an insurance product that may be offered in this state. (2) Existing law requires the Insurance Commissioner to publish notices of insurer liquidation in a newspaper of general circulation, published in the county in which the proceeding is pending, and in the Counties of Alameda, Los Angeles, Sacramento, San Diego, San Francisco, and Santa Clara, not less than once a week for 4 successive weeks. This bill would delete the requirement of publication in certain cities and counties for the required period of time, and instead would require only publication in geographic areas pertinent to the liquidation and that the publication reference a source, either the liquidated company's or the liquidator's Internet Web site, where ongoing information for creditors would be provided. Existing law authorizes the commissioner to apply by verified application for an order for the liquidation of a domestic corporation in the insurance business. This bill would incorporate the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 by authorizing the Federal Deposit Insurance Corporation to stand in the place of the commissioner and file a verified application in state court to place the insurer into liquidation under the laws and requirements of the state. (3) Existing law requires that on or before May 1 of each year, insurers, engaged in writing child care liability insurance coverage, submit a report to the commissioner of their operations regarding child care liability claims experience for the preceding calendar year ending on December 31 on a form furnished by the commissioner. The commissioner is required to annually report to the Governor, Legislature, and to the Assembly and Senate Committees on Insurance regarding certain court actions, such as medical malpractice, and child care liability claims. This bill would delete the requirement of that the insurer child care liability claims experience report for the preceding calendar year ending on December 31 be submitted to the commissioner on or before May 1 of each year, and would instead require that the report for the preceding calendar year be submitted at the request of the commissioner, but not more than annually, on a form prescribed by the commissioner. The bill would also delete the commissioner's reports to the Governor, Legislature, and to the Assembly and Senate Committees on Insurance described above. (4) The bill would also make conforming changes and delete obsolete provisions. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 100 of the Insurance Code is amended to read: 100. Insurance in this state is divided into the following classes: (1) Life (2) Fire (3) Marine (4) Title (5) Surety (6) Disability (7) Plate glass (8) Liability (9) Workmen's compensation (10) Common carrier liability (11) Boiler and machinery (12) Burglary (13) Credit (14) Sprinkler (15) Team and vehicle (16) Automobile (17)
MortgageReserved ] (18) Aircraft (19) Mortgage guaranty (19.5) Insolvency (19.6) Legal insurance (20) Miscellaneous SEC. 2. Section 117 of the Insurance Code is repealed. 117. Mortgage insurance includes the guaranteeing of the payment of the principal, interest and other sums agreed to be paid under the terms of any note or bond secured by mortgage, or other sums secured under the terms of any such mortgage, in its entirety, or of any undivided or other partial interest in any such mortgage, or in a group of such mortgages, and the guaranteeing or insuring, directly or indirectly, against loss thereon.SEC. 3. Section 661 of the Insurance Code is amended to read: 661. (a) A notice of cancellation of a policy shall be effective only if it is based on one or more of the following reasons: (1) Nonpayment of premium. (2) The driver's license or motor vehicle registration of the named insured or of any other operator who either resides in the same household or customarily operates an automobile insured under the policy has been under suspension or revocation during the policy period or, if the policy is a renewal, during its policy period or the 180 days immediately preceding its effective date. (3) Discovery of fraud by the named insured in pursuing a claim under the policy provided the insurer does not rescind the policy. (4) Discovery of material misrepresentation of any of the following information concerning the named insured or any resident of the same household who customarily operates an automobile insured under the policy: (A) Safety record. (B) Annual miles driven in prior years. (C) Number of years of driving experience. (D) Record of prior automobile insurance claims, if any. (E) Any other factor found by the commissioner to have a substantial relationship to the risk of loss. Any insured who negligently misrepresents information described in this paragraph may avoid cancellation by furnishing corrected information to the insurer within 20 days after receiving notice of cancellation and agreeing to pay any difference in premium for the policy period in which the information remained undisclosed. (5) A substantial increase in the hazard insured against. (b) This section shall not apply to any policy or coverage that has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy. (c)(b) Modification of automobile physical damage coverage by the inclusion of a deductible not exceeding one hundred dollars ($100) shall not be deemed a cancellation of the coverage or of the policy. (d)(c) This section shall not apply to nonrenewal. SEC. 4. Section 700.04 of the Insurance Code is amended to read: 700.04. Paid-in capital for life insurers is governed by Section 10510 of this code; for title insurers by Section 12359 ; for mortgage insurers by Section 12440; and for mortgage guaranty insurers by Section 12640.03. SEC. 5. Section 923.6 of the Insurance Code is amended to read: 923.6. (a) Every admitted property and casualty insurer, unless otherwise exempted by the domiciliary commissioner, shall annually submit the opinion of an Appointed Actuary entitled "Statement of Actuarial Opinion." This opinion shall be filed in accordance with the appropriate Property and Casualty Annual Statement Instructions of the National Association of Insurance Commissioners (NAIC). (1) For purposes of this section, the term, "property and casualty insurer" means any admitted insurer writing insurance as described in Section 102, 103, 105, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116 , 117, 118, 119, 119.6, 120, 124, or 124.5. (2) For purposes of this section, the following terms have the same meaning as used in the Property and Casualty Annual Statement Instructions of the NAIC: (A) Actuarial Opinion. (B) Actuarial Opinion Summary. (C) Actuarial Report. (D) Appointed Actuary. (E) Statement of Actuarial Opinion. (F) Property and Casualty Annual Statement Instructions. (3) The commissioner may adopt regulations related to the terms and conditions required by the Property and Casualty Annual Statement Instructions of the NAIC. (b) Every property and casualty insurer domiciled in this state that is required to submit a Statement of Actuarial Opinion shall annually submit an Actuarial Opinion Summary, written by the insurer' s Appointed Actuary. This Actuarial Opinion Summary shall be filed in accordance with the appropriate Property and Casualty Annual Statement Instructions of the NAIC and shall be considered as a document supporting the Actuarial Opinion required in subdivision (a). (c) An admitted insurer not domiciled in this state shall provide the Actuarial Opinion Summary upon request of the commissioner. (d) An Actuarial Report and underlying workpapers as required by the appropriate Property and Casualty Annual Statement Instructions of the NAIC shall be prepared to support each Actuarial Opinion. If an insurer fails to provide either a supporting Actuarial Report or workpapers at the request of the commissioner, or if the commissioner determines that the supporting Actuarial Report or workpapers provided by the insurer are otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and prepare the supporting Actuarial Report or workpapers. (e) Notwithstanding subdivision (d) of Section 6254 of the Government Code, subdivision (f), or any other provision of law, the Statement of Actuarial Opinion required by subdivision (a) shall be a public record and open to inspection. (f) (1) Documents, materials, or other information in the possession or control of the commissioner that are considered an Actuarial Report, workpapers, or Actuarial Opinion Summary provided in support of the Statement of Actuarial Opinion, and any other material provided by the insurer to the commissioner in connection with the Actuarial Report, workpapers, or Actuarial Opinion Summary shall be confidential by law and privileged, shall not be made public by the commissioner or any other person and are exempt from the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code), shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any civil action brought by a private party. (2) This subdivision shall not limit the commissioner's authority to release the documents, materials, and other information described in paragraph (1) to the American Academy of Actuaries' Actuarial Board for Counseling and Discipline (ABCD), or its successor, so long as those documents, materials, and other information are required for the purpose of professional disciplinary proceedings, and the ABCD establishes procedures satisfactory to the commissioner for preserving the confidentiality of the documents, nor shall this subdivision limit the commissioner's authority to use those documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the commissioner's official duties. (3) The commissioner may also exercise, with respect to the documents, materials, or other information described in paragraph (1), all the authority specified in subdivision (b) of Section 735.5, or any successor provision. SEC. 6. Section 985 of the Insurance Code is amended to read: 985. (a) On or after January 1, 1970, as used in this article and in paragraph (9) of subdivision (i)(a) of Section 1011, "insolvency" means either of the following: (1) Any impairment of minimum "paid-in capital" or "capital paid in," as defined in Section 36, required in the aggregate of an insurer by the provisions of this code for the class, or classes, of insurance that it transacts anywhere. (2) An inability of the insurer to meet its financial obligations when they are due. (b) On or after January 1, 1970, an insurer cannot escape the condition of insolvency by being able to provide for all its liabilities and for reinsurance of all outstanding risks. An insurer must also be possessed of additional assets equivalent to suchthe aggregate "paid-in capital" or "capital paid in" required by this code after making provision for all suchthose liabilities and for suchthat reinsurance. (c) On or after October 1, 1967, as used in this code provision for reinsurance of all outstanding risks and "gross premiums without any deduction, received and receivable upon all unexpired risks" means the greater of: (1) the aggregate amount of actual unearned premiums, or (2) the amount reasonably estimated as being required to reinsure in a solvent admitted insurer the unexpired terms of the risks represented by all outstanding policies. (d) On or after October 1, 1967, an insurer mustshall make provision for reinsurance of the outstanding risk on policies that provide premiums are fully earned at inception and on policies that for any other reason do not provide for a return premium to the insured on cancellation prior to expiration. (e) On or after October 1, 1967, the commissioner shall prescribe standards for reasonably estimating the amount required to reinsure that will provide adequate safeguards for the policyholders, creditors , and the public. (f) On or after October 1, 1967, this section shall not be applicable to life, title, mortgage , or mortgage guaranty insurers. (g) In the application of this section to disability insurance, as defined in Section 106, reserves for unearned premiums and amounts reasonably estimated as required to reinsure outstanding risks shall be determined in accordance with the provisions of Section 997. SEC. 7. Section 1011 of the Insurance Code is amended to read: 1011. (a) The superior court of the county in which the principal office of a person described in Section 1010 is located shall, upon the filing by the commissioner of the verified application showing any of the followingconditions hereinafter enumerated toin this subdivision exist, or a filing by the Federal Deposit Insurance Corporation of the verified application showing that the conditions enumerated in subdivision (b) exist and the conditions set forth in Section 5383(e)(3) of Title 12 of the United States Code having been satisfied, shall issue its order vesting title to all of the assets of that person, wheresoever situated, in the commissioner or his or her successor in office, in his or her official capacity as such, and direct the commissioner forthwith to take possession of all of its books, records, property, real and personal, and assets, and to conduct, as conservator, the business of saidthe person, or so much thereof as to the commissioner may seem appropriate, and enjoining saidthe person and its officers, directors, agents, servants, and employees from the transaction of its business or disposition of its property until theany of the following further order of saidthe court: (a)(1) That suchthe person has refused to submit its books, papers, accounts, or affairs to the reasonable inspection of the commissioner or his or her deputy or examiner. (b)(2) That suchthe person has neglected or refused to observe an order of the commissioner to make good within the time prescribed by law any deficiency in its capital if it is a stock corporation, or in its reserve if it is a mutual insurer. (c)(3) That suchthe person, without first obtaining the consent in writing of the commissioner, has transferred, or attempted to transfer, substantially its entire property or business or, without suchconsent, has entered into any transaction the effect of which is to merge, consolidate, or reinsure substantially its entire property or business in or with the property or business of any other person. (d)(4) That suchthe person is found, after an examination, to be in such condition that its further transaction of business will be hazardous to its policyholders, or creditors, or to the public. (e)(5) That suchthe person has violated its charter or any law of the state. (f)(6) That any officer of suchthe person refuses to be examined under oath, touching its affairs. (g)(7) That any officer or attorney in fact of suchthe person has embezzled, sequestered, or wrongfully diverted any of the assets of suchthe person. (h)(8) That a domestic insurer does not comply with the requirements for the issuance to it of a certificate of authority, or that its certificate of authority has been revoked ; or. (i)(9) That the last report of examination of any person to whom the provisions of this article apply shows suchthe person to be insolvent within the meaning of Article 13 (commencing with Section 980), Chapter 1, Part 2, Division 1; or if a reciprocal or interinsurance exchange, within the applicable provisions of Section 1370.2, 1370.4, 1371, or 1372; or if a life insurer, within the applicable provisions of Sections 10510 and 10511. (b) Notification is given by the United States Secretary of the Treasury that a determination has been made by the secretary, in accordance with and satisfying the provisions of Section 5383(b) of Title 12 of the United States Code, as to a person described in Section 1010 that is an insurance company as defined in Section 5381 (a)(13) of Title 12 of the United States Code, and one of the following: (1) The board of directors, or body performing similar functions, of the person acquiesces or consents to the appointment of a receiver as provided for in Section 5832(a)(1)(A)(i) of Title 12 of the United States Code, with that consent to be considered to be consent to issuance of an order under this section. (2) The United States District Court for the District of Columbia issued an order for the appointment of a receiver of the person as provided for in Section 5382(a)(1)(A)(iv)(I) of Title 12 of the United States Code, without regard to whether an appeal of the order is pending. (3) A petition by the United States Secretary of the Treasury for appointment of a receiver was made to the United States District Court for the District of Columbia and was granted by operation of the law as provided for in Section 5382(a)(1)(A)(v) of Title 12 of the United States Code, without regard to whether an appeal of the order is pending. SEC. 8. Section 1011.1 is added to the Insurance Code, to read: 1011.1. If a verified application is filed pursuant to Section 1011 that shows that the conditions set forth in subdivision (b) of Section 1011 exist and upon a showing that notice was provided to the person that is the subject of the verification application, all of the following apply: (a) A superior court hearing shall be held in which the person may oppose the verified application solely on the grounds that the conditions set forth in subdivision (b) of Section 1101 do not exist. The hearing shall be completed within 24 hours after the verified application is filed with the court. (b) The superior court shall issue an order as provided for in Section 1011 within 24-hours after the verified application was filed with the court. (c) If the superior court does not issue an order within 24 hours as provided for in subdivision (b), then an order described in subdivision (a) of Section 1011 shall be deemed granted by operation of law upon expiration of the 24-hour period, without further notice. (d) An order entered by the superior court pursuant to subdivision (b) or entered by operation of law pursuant to subdivision (c) shall not be subject to any stay or injunction pending appeal. SEC. 9. Section 1012 of the Insurance Code is amended to read: 1012. SaidExcept in the case of an order issued based on a ve rified application showing the conditions in subdivision (b) of Section 1011 to exist, the order shall continue in force and effect until, on the application either of the commissioner or of suchthat person, it shall, after a full hearing, appear to saidthe court that the ground for saidthe order directing the commissioner to take title and possession does not exist or has been removed and that saidthe person can properly resume title and possession of its property and the conduct of its business. SEC. 10. Section 1016 of the Insurance Code is amended to read: 1016. (a) If at any time after the issuance of an order under sectionSection 1011, or if at the time of instituting any proceeding under this article, including under Section 1011, it shall appear to the commissioner that it would be futile to proceed as conservator with the conduct of the business of suchthat person, he or she may apply to the court for an order to liquidate and wind up the business of saidthe person. Upon a full hearing of suchthat application, the court may make an order directing the winding up and liquidation of the business of suchthat person by the commissioner, as liquidator, for the purpose of carrying out the order to liquidate and wind up the business of suchthat person. (b) Notwithstanding subdivision (a), the court may issue an order to liquidate and wind up the business of a person as to whom a verified application is filed pursuant to subdivision (b) of Section 1011 based solely on the verified application and hearing as provided for in subdivision (a) of Section 1011.1, without further hearing, or may issue an order to liquidate and wind up the business of the person upon application by the commissioner after the issuance of an order under Section 1011. The court's order may direct the winding up and liquidation of the business of the person by the commissioner, as liquidator, for the purpose of carrying out the order to liquidate and wind up the business of the person. SEC. 11. Section 1022 of the Insurance Code is amended to read: 1022. SuchThe notice shall be published in a newspapernewspapers of general circulation , published in the county in which the proceeding is pending, and in the Counties of Alameda, Los Angeles, Sacramento, San Diego, San Francisco, and Santa Clara, not less than once a week for four successive weeksin geographic areas pertinent to the liquidation. The notice shall reference a source, either the liquidated company's or the liquidator's Internet Web site, where ongoing information for creditors shall be provided . A copy of the notice, accompanied by an affidavit of due publication, including a statement of the date of firstpublication, shall be filed with the clerk of the court. SEC. 12. Section 1061 of the Insurance Code is amended to read: 1061. In verification of the matters set forth in Section 1060 of this code, the Department of Finance shall, at least every two years or more often if requested by the commissioner, examine the commissioner's books and accounts relating to all proceedings under this article and Article 8 (commencing with Section 12550), Chapter 2, Part 6, Division 2 of this code, and shall file a report of each suchexamination with the court in which the respective proceeding is pending and shall furnish the commissioner a certified copy of each suchreport. The expense of examining the books and accounts of the commissioner as conservator or liquidator under this article or under Article 8 (commencing with Section 12550), Chapter 2, Part 6 of Division 2 of this codeshall be paid out of the support appropriation for the Department of Insurance current at the date of billing for suchthe expense and shall, upon order of the court or courts before which the proceedings under saidthe articles are pending, be ratably reimbursed to suchthat appropriation out of the assets of the estates administered by the commissioner as conservator or liquidator under this article or under Article 8 (commencing with Section 12550), Chapter 2, Part 6 of Division 2 of this code. SEC. 13. Section 1063 of the Insurance Code is amended to read: 1063. (a) Within 60 days after the original effective date of this article, all insurers, including reciprocal insurers, admitted to transact insurance in this state of any or all of the following classes only in accordance with the provisions of Chapter 1 (commencing with Section 100) of Part 1 of this division: fire (see Section 102), marine (see Section 103), plate glass (see Section 107), liability (see Section 108), workers' compensation (see Section 109), common carrier liability (see Section 110), boiler and machinery (see Section 111), burglary (see Section 112), sprinkler (see Section 114), team and vehicle (see Section 115), automobile (see Section 116), aircraft (see Section 118), and miscellaneous (see Section 120), shall establish the California Insurance Guarantee Association (the association); provided, however, this article shall not apply to the following classes or kinds of insurance: life and annuity (see Section 101), title (see Section 104), fidelity or surety including fidelity or surety bonds, or any other bonding obligations (see Section 105), disability or health (see Section 106), credit (see Section 113), mortgage (see Section 117),mortgage guaranty, insolvency or legal (see Section 119), financial guaranty or other forms of insurance offering protection against investment risks (see Section 124), the ocean marine portion of any marine insurance or ocean marine coverage under any insurance policy including the following: the Jones Act (46 U.S.C. Sec. 688), the Longshore and Harbor Workers' Compensation Act (33 U.S.C. Sec. 901 et seq.), or any other similar federal statutory enactment, or any endorsement or policy affording protection and indemnity coverage, or reinsurance as defined in Section 620, or fraternal fire insurance written by associations organized and operating under Sections 9080 to 9103, inclusive. Any insurer admitted to transact only those classes or kinds of insurance excluded from this article shall not be a member insurer of the association. Each insurer admitted to transact a class of insurance included in this article, including the State Compensation Insurance Fund, as a condition of its authority to transact insurance in this state, shall participate in the association whether established voluntarily or by order of the commissioner after the elapse of 60 days following the original effective date of this article in accordance with rules to be established as provided in this article. It shall be the purpose of the association to provide for each member insurer insolvency insurance as defined in Section 119.5. (b) The association shall be managed by a board of governors, composed of nine member insurers, each of which shall be appointed by the commissioner to serve initially for terms of one, two, or three years and thereafter for three-year terms so that three terms shall expire each year on December 31, and shall continue in office until his or her successor shall be appointed and qualified. At least five members of the board shall be domestic insurers. At least three of the members shall be stock insurers, and at least three shall be nonstock insurers. The nine members shall be representative, as nearly as possible, of the classes of insurance and of the kinds of insurers covered by this article. In case of a vacancy for any reason on the board, the commissioner shall appoint a member insurer to fill the unexpired term. In addition to the nine member insurers, the membership of the board shall also include one public member appointed by the President pro Tempore of the Senate, one public member appointed by the Speaker of the Assembly, one business member appointed by the commissioner, and one labor member appointed by the commissioner. (c) The association shall adopt a plan of operations, and any amendments thereto, not inconsistent with the provisions of this article, necessary to assure the fair, reasonable, and equitable manner of administering the association, and to provide for other matters as are necessary or advisable to implement the provisions of this article. The plan of operations and any amendments thereto shall be subject to prior written approval by the commissioner. All members of the association shall adhere to the plan of operation. (d) If for any reason the association fails to adopt a suitable plan of operation within 90 days following the original effective date of this article, or if at any time thereafter the association fails to adopt suitable amendments to the plan of operation, the commissioner shall after hearing adopt and promulgate reasonable rules as are necessary or advisable to effectuate the provisions of this chapter. These rules shall continue in force until modified by the commissioner after hearing or superseded by a plan of operation, adopted by the association and approved by the commissioner. (e) In accordance with its plan of operation, the association may designate one or more of its members as a servicing facility, but a member may decline this designation. Each servicing facility shall be reimbursed by the association for all reasonable expenses it incurs and for all payments it makes on behalf of the association. Each servicing facility shall have authority to perform any functions of the association that the board of governors lawfully may delegate to it and to do so on behalf of and in the name of the association. The designation of servicing facilities shall be subject to the approval of the commissioner. (f) The association shall have authority to borrow funds when necessary to effectuate the provisions of this article, and may provide in its plan of operations for any of the following: (1) The issuance of notes, bonds, or debentures, or the establishment of a special purpose trust or other entity, solely for the purpose of facilitating a financing. (2) The securing of that borrowing or those notes, bonds, or debentures by pledging or granting liens or mortgages, or by otherwise encumbering its real or personal property, including, but not limited to, premiums levied under Section 1063.5. (g) The association, either in its own name or through servicing facilities, may be sued and may use the courts to assert or defend any rights the association may have by virtue of this article as reasonably necessary to fully effectuate the provisions thereof. (h) The association shall have the right to intervene as a party in any proceeding instituted pursuant to Section 1016 wherein liquidation of a member insurer as defined in Section 1063.1 is sought. (i) (1) The association shall have an annual audit of its financial condition conducted by an independent certified public accountant. The audit shall be conducted, to the extent possible, in accordance with generally accepted auditing standards (GAAS) and the report of the audit shall be submitted to the commissioner. (2) The association shall annually audit at least one-third of the service companies retained by the association to adjust claims of insolvent insurers. The audits shall (A) assure that all covered claims are being investigated, adjusted, and paid in accordance with customary industry standards and practices and all applicable statutes, rules and regulations, and (B) examine the management and supervisory systems overseeing the claims functions. The audits shall be conducted by the association or an independent auditor, provided that the three largest service companies, as measured by the number of claims processed for the association during the previous three fiscal years, shall be audited by an independent auditor at least once every three years. The association shall implement systems to retain independent auditing firms for the purpose of this paragraph, provided that no one firm is designated or utilized as an exclusive provider. Audits conducted pursuant to this paragraph shall be submitted annually to the commissioner for review. (j) The commissioner shall examine the association to the same extent as, and in accordance with, the requirements of Article 4 (commencing with Section 730)729) of Chapter 1 of Part 2 of Division 2,1, which sets forth the examination requirements applicable to admitted insurers. A copy of the examination report shall be filed with the Chairpersons of the Senate and Assembly Committees on Insurance no later than December 31 of the year the report is completed. SEC. 14. Section 1070.6 of the Insurance Code is amended to read: 1070.6. The withdrawal procedure and fees prescribed by this article shall not be required of a nonsurviving admitted constituent to a merger or consolidation into another admitted insurer in accordance with the applicable statutes and the commissioner's prior written consent given pursuant to paragraph (3) of subdivision (c)(a) of Section 1011, provided the commissioner is satisfied by documents, authenticated so as to be admissible in evidence over objection, filed with him, that: (a) SuchThe constituent has discharged all of its liabilities to residents of this state in the manner provided by Section 1071.5; (b) There will be an admitted insurer directly available to suchthe constituent's policyholders: (1) to obtain policy changes and endorsements, (2) to receive payment of premiums and refund unearned premiums, (3) to serve notice of claim, proof of loss, summons, process, and other papers, and (4) for purposes of suit; (c) SuchThe constituent shall timely file with the commissioner appropriate financial statements reporting its insurance business done in this state during the calendar year of the merger or consolidation and all appropriate tax returns required by law for suchthe period, and shall timely pay all taxes found to be due on account of suchthe business; and (d) SuchThe constituent has surrendered its current California certificate of authority to the commissioner for cancellation as of the effective date of the merger. The withdrawal procedure and fees prescribed by this article shall not be required of an insurer whichthat has been liquidated by a final order of a court of record of this or any sister state provided a certified copy of suchthe order reciting the fact of liquidation and discharge of all obligations has been filed with the commissioner. SEC. 15. Section 1851 of the Insurance Code is amended to read: 1851. The provisions of this chapter shall apply to all insurance on risks or on operations in this state, except: (a) Reinsurance, other than joint reinsurance to the extent stated in Article 5 (commencing with Section 1856) . (b) Life insurance. (c) Insurance of vessels or craft, their cargoes, marine builders' risks, marine protection and indemnity, or other risks commonly insured under marine, as distinguished from inland marine, insurance policies. Inland marine insurance shall be deemed to include insurance now or hereafter defined by statute, or by interpretation thereof, or if not so defined or interpreted, by ruling of the commissioner or as established by general custom of the business, as inland marine insurance. (d) Title insurance. (e) Disability insurance. (f) Workers' compensation insurance and insurance of any liability of employers for injuries to, or death of, employees arising out of, and in the course of, employment when this insurance is incidental to, and written in connection with, the workers' compensation insurance issued to the same employer and covering the same employer interests. (g) Mortgage insurance. (h)(g) Insurance transacted by county mutual fire insurers or county mutual fire reinsurers. SEC. 16. Section 1864 of the Insurance Code is amended to read: 1864. (a) On or before May 1 of each year, commencing in 1987, eachEach insurer engaged in writing child care liability insurance coverage in this state shall submit to the commissioner a report of its operations regarding child care liability claims experience for the last preceding calendar year ending on December 31 on a form furnishedat the request of the commissioner, but not more than annually, on a form prescribed by the commissioner. Each report shall separately state the following information for family day care homes, as defined in Section 1596.78 of the Health and Safety Code, and licensed child care centers, as defined in Section 1596.76 of the Health and Safety Code: (1) Premiums earned. (2) Premiums written. (3) Number of claims. (4) Number of new claims during the reporting period. (5) Number of claims closed during the reporting period. (6) Number of claims outstanding at the end of the reporting period. (7) Total losses incurred. (8) Total losses incurred as a percentage of premiums earned. (9) Total number of policies in force on the last day of the reporting period. (10) Total number of policies canceled. (11) Total number of policies nonrenewed. (12) Net underwriting gain or loss. (13) Separate allocations of expenses for commissions, other acquisition costs, general office expenses, taxes, licenses and fees, and other expenses. The allocations required by this section shall be made by dividing the company's total premiums earned for child care liability insurance by its total premiums earned and applying the ratio determined to the expenses reported in the company's annual statement filed with the commissioner pursuant to Section 900. (b) The commissioner shall develop and issue reporting forms to insurers at least 90 days prior to the due date of the reports required pursuant to this section. (c) The Legislature finds that it is in the public interest of the policyholders of this state that insurers writing child care liability insurance permit remittance of premiums to occur on an installment basis. (d) The information provided under this section pertaining to a specified claim, insurance policy, or insurer shall be confidential and shall only be revealed by the department on a nonspecific basis as part of an aggregate report of claims or policies. SEC. 17. Section 12100 of the Insurance Code is amended to read: 12100. As used in this article: (a) (1) "Financial guaranty insurance" means a surety bond, an insurance policy or, when issued by an insurer, an indemnity contract and any guarantee similar to the foregoing types, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee, or indemnitee as a result of any of the following events: (A) Failure of any obligor on or issuer of any debt instrument or other monetary obligation (including equity securities guaranteed under a surety bond, insurance policy, or indemnity contract) to pay, when due to be paid by the obligor or scheduled at the time insured to be received by the holder of the obligation, principal, interest, premium, dividend, purchase price of or on the instrument or obligation, or other monetary payment when the failure is the result of financial default or insolvency, or, provided that the payment source is investment grade, any other failure of that payment source to make payment, regardless of whether the obligation is incurred directly or as guarantor by or on behalf of another obligor that has also defaulted. (B) Changes in the levels of interest rates, whether short or long term, or the differential in interest rates between various markets or products. (C) Changes in the rate of exchange of currency. (D) Changes in the value of financial or commodity indices, or price levels in general. (E) Other events that the commissioner determines by order, regulation, or written consent are substantially similar to any of the foregoing. (2) Notwithstanding paragraph (1), "financial guaranty insurance" shall not include any of the following: (A) Insurance of any loss resulting from any event described in paragraph (1), if the loss is payable only upon the occurrence of any of the following, as specified in a surety bond, insurance policy, or indemnity contract: (i) A fortuitous physical event. (ii) A failure of or deficiency in the operation of equipment. (iii) An inability to extract or recover a natural resource. (B) Title insurance authorized by Section 104 and as permitted to be written by title insurers pursuant to Chapter 1 (commencing with Section 12340) of Part 6 of this division. (C) Surety insurance as authorized by Section 105. (D) Credit unemployment insurance, meaning insurance on a debtor in connection with a specific loan or other credit transaction, to provide payments to a creditor in the event of unemployment of the debtor for the installments or other periodic payments becoming due while a debtor is unemployed. (E) Credit insurance authorized by Section 113. (F) Guaranteed investment contracts and funding agreements issued by life insurance companies whichthat provide that the life insurer itself will make specified payments in exchange for specific premiums or contributions. (G) Mortgage insurance authorized by Section 117 and as permitted to be written by mortgage insurers pursuant to Chapter 2 (commencing with Section 12420) of Part 6 of this division. (H)(G) Mortgage guaranty insurance authorized by Section 119 and as permitted to be written by a mortgage guaranty insurer pursuant to Chapter 2A (commencing with Section 12640.01) of Part 6 of this division. (I)(H) Indemnity contracts or similar guarantees, to the extent that they are not otherwise limited or proscribed by this article, in which a life insurer does any of the following: (i) Guarantees its obligations or indebtedness or the obligations or indebtedness of a subsidiary (as defined in Section 1215) other than a financial guaranty insurance corporation; provided that: (I) To the extent that any suchobligations or indebtedness are backed by specific assets, those assets shall at all times be owned by the life insurer or the subsidiary. (II) In the case of the guarantee of the obligations or indebtedness of the subsidiary that are not backed by specific assets of the life insurer, the guarantee terminates once the subsidiary ceases to be a subsidiary. (ii) Guarantees obligations or indebtedness (including the obligation to substitute assets where appropriate) with respect to specific assets acquired by a life insurer in the course of normal investment activities and not for the purpose of resale with credit enhancement, or guarantees obligations or indebtedness acquired by its subsidiary, provided that the assets acquired pursuant to this clause have been either of the following: (I) Acquired by a special purpose entity, whose sole purpose is to acquire specific assets of the life insurer or the subsidiary and issue securities or participation certificates backed by the assets. (II) Sold to an independent third party. (iii) Guarantees obligations or indebtedness of an employee or agent of the life insurer. (J)(I) Any cramdown bond or mortgage repurchase bond, as those phrases are used by nationally recognized rating agencies in respect of mortgage-backed securities. (K)(J) Residual value insurance. (L)(K) Any other form of insurance covering risks that the commissioner determines by order, regulation, or written consent to be substantially similar to any of the foregoing. (b) "Affiliate" means a person that, directly or indirectly, owns at least 10 but less than 50 percent of the financial guaranty insurance corporation or that is at least 10 percent but less than 50 percent, directly or indirectly, owned by a financial guaranty insurance corporation. (c) "Asset-backed securities" means either of the following: (1) Securities or other financial obligations of an issuer provided that both of the following apply: (A) The issuer is a special purpose corporation, trust, or other entity, or, provided that the securities or other financial obligations constitute an insurable risk, is a bank, trust company, or other financial institution, deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or any successors thereto. (B) The securities or other financial obligations are related to a pool of assets so that all of the following apply: (i) The pool of assets has been conveyed, pledged, or otherwise transferred to or is otherwise owned or acquired by the issuer. (ii) The pool of assets backs the securities or other financial obligations issued. (iii) No asset in the pool, other than an asset directly payable by, guaranteed by, or backed by the full faith and credit of the United States government or that otherwise qualifies as collateral under paragraph (1) or (2) of subdivision (e), has a value exceeding 20 percent of the aggregate value of the pool. (2) A pool of credit default swaps or credit default swaps referencing a pool of obligations, provided that each of the following is true: (A) The swap counterparty whose obligations are insured under the credit default swap is a special purpose corporation, special purpose trust, or other special purpose legal entity. (B) No reference obligation in the pool, other than an obligation directly payable by, guaranteed by, or backed by the full faith and credit of the United States government, or that otherwise qualifies as collateral under paragraph (2) of subdivision (e), has a notional amount exceeding 10 percent of the pool's aggregate notional amount. (C) The insurer has the benefit of a deductible or other first loss credit protection against claims under its insurance policy. (d) "Average annual debt service" means the amount of insured unpaid principal and interest on an obligation multiplied by the number of the insured obligations (assuming that each obligation represents a $1,000 par value), divided by the amount equal to the aggregate life of all of those obligations. This definition, expressed as a formula in regard to bonds, is as follows: Total Debt Service 02 Number Average Annual = of Bonds Debt Service Bond Years Total Debt Insured Unpaid Principal + Service = Interest Number of Bonds = Total Insured Principal $1,000 Bond Years = Number of Bonds 02 Term in Years Term in Years = Term to maturity based on scheduled amortization or, in the absence of a scheduled amortization in the case of asset-backed securities or other obligations lacking a scheduled amortization, expected amortization, in each case determined as of the date of issuance of the insurance policy based upon the amortization assumptions employed in pricing the insured obligations or otherwise used by the insurer to determine aggregate net liability. (e) "Collateral" means any of the following: (1) Cash. (2) The cashflow from specific obligations whichthat are not callable and scheduled to be received based on expected prepayment speed on or prior to the date of scheduled debt service (including scheduled redemptions and prepayments) on the insured obligation, provided that any of the following is true, as applicable: (A) The specific obligations are directly payable by, guaranteed by or backed by the full faith and credit of the United States government. (B) In the case of insured obligations denominated or payable in a foreign currency as permitted under paragraph (3) of subdivision (b) of Section 12112, the specific obligations are directly payable by, guaranteed by, or backed by the full faith and credit of the foreign government or the central bank thereof. (C) The specific obligations are insured by the same insurer that insures the obligations being collateralized, and the cashflows from the specific obligations are sufficient to cover the insured scheduled payments on the obligations being collateralized. (3) The market value of investment grade obligations, other than obligations evidencing an interest in the project or projects financed with the proceeds of the insured obligations. (4) The face amount of each letter of credit that meets all of the following criteria: (A) Is irrevocable. (B) Provides for payment under the letter of credit in lieu of or as reimbursement to the insurer for payment required under a financial guaranty insurance policy. (C) Is issued, presentable, and payable either: (i) At an office of the letter of credit issuer in the United States. (ii) At an office of the letter of credit issuer located in the jurisdiction in which the trustee or paying agent for the insured obligation is located. (D) Contains a statement that either: (i) Identifies the financial guaranty insurance corporation, its collateral agent, or any successor by operation of law, including any liquidator, rehabilitator, receiver , or conservator, as the beneficiary. (ii) Identifies the trustee or the paying agent for the insured obligation as the beneficiary. (E) Contains a statement to the effect that the obligation of the letter of credit issuer under the letter of credit is an individual obligation of that issuer and is in no way contingent upon reimbursement with respect thereto. (F) Contains an issue date and an expiration date. (G) Does either of the following: (i) Has a term at least as long as the shorter of the term of the insured obligation or the term of the financial guaranty insurance policy. (ii) Provides that the letter of credit shall not expire without 30 days prior written notice to the beneficiary and allows for drawing under the letter of credit in the event that, prior to expiration, the letter of credit is not renewed or extended or a substitute letter of credit or alternate collateral meeting the requirements of subdivision (e) is not provided. (H) If the letter of credit is governed by the 1983 revision of the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce (Publication 400 or 500), or any successor revision approved by the commissioner, it shall contain a provision for an extension of time, of not less than 30 days after resumption of business, to draw against the letter of credit in the event that one or more of the occurrences described in Article 19 of Publication 400 or 500 occurs. (I) Is issued by a bank, trust company, or savings association that meets all of the following criteria: (i) Is organized and existing under the laws of the United States or any state thereof or, in the case of a financial institution organized under the laws of a foreign country, has a branch or agency office licensed under the laws of the United States or any state thereof and is domiciled in a member country of the Organization of Economic Co-operation and Development having a sovereign rating in one of the top two generic lettered rating classifications by a securities rating agency acceptable to the commissioner. (ii) Has (or is the principal operating subsidiary of a financial institution holding company that has) a long-term debt rating of at least investment grade. (iii) Is not a parent, subsidiary or affiliate of the trustee or paying agent, if any, with respect to the insured obligation if that trustee or paying agent is the named beneficiary of the letter of credit. (5) The amount of credit protection available to the insurer (or its nominee) under each credit default swap that satisfies each of the following: (A) May not be amended without the consent of the insurer and may only be terminated in accordance with one of the following: (i) At the option of the insurer. (ii) At the option of the counterparty to the insurer (or its nominee), if the credit default swap provides for the payment of a termination amount equal to the replacement cost of the terminated credit default swap determined with reference to standard documentation of the International Swap and Derivatives Association, Inc. or otherwise acceptable to the commissioner. (iii) At the discretion of the commissioner acting as rehabilitator, liquidator, or receiver of the insurer upon payment by or on behalf of the insurer of any termination amount due from the insurer. (B) Provides for payment under all instances in which payment under a financial guaranty insurance policy is required, except that payment under the credit default swap may be on a first loss, excess of loss, or other nonpro-rata basis and may apply on an aggregate basis to more than one policy. (C) Is provided by one of the following: (i) A counterparty whose obligations under the credit default swap are insured by a financial guaranty insurance corporation licensed under this article or guaranteed by a financial institution referred to in clauses (ii) and (iii) of this subparagraph. (ii) A financial institution satisfying the requirements of clauses (i) to (iii), inclusive, of subparagraph (I) of paragraph (4), provided that obligations of the financial institution on parity with its obligations under the credit default swap are rated as investment grade, and further provided that, if the financial institution is not organized under, or acting through a branch or agency office licensed under, the laws of the United States or any state thereof, then the financial institution is required to collateralize the replacement cost of the credit default swap in the event that it fails to maintain the investment grade rating. (iii) Any other financial institution that the commissioner determines to be substantially similar to any specified in clause (i) or (ii). (iv) The requirements of this subparagraph shall not be construed as authority for an insurer domiciled in the United States to issue credit default swaps unless the insurer has explicit authority to issue credit default swaps. Collateral shall be deposited with or held by the financial guaranty insurance corporation, held by a trustee or agent for the benefit of the financial guaranty insurance corporation in trust or to perfect a security interest, or held in trust pursuant to the bond indenture or other trust arrangement by a trustee or custodian for the benefit of holders of the insured obligations in the form of funds for payment of insured obligations, sinking funds, or other reserves whichthat may be used for the payment of insured obligations, collateral agent fees and trustee fees, or reimbursement of the financial guaranty insurance corporation on any obligation insured by the corporation. Any suchThe trustee, custodian, or agent shall be a bank, savings association, depository institution, or other entity acceptable to the commissioner, the deposits of which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation (or any successors thereto), or in the case of banking organizations organized under the laws of a foreign country in addition satisfies the requirements of clauses (i) and (ii) of subparagraph (I) of paragraph (4) of subdivision (e) of Section 12100, and, in each case whichthat has a net worth of at least twenty-five million dollars ($25,000,000). Any suchThe trustee or agent may also be an approved or qualified servicer or originator of the kind of assets whichthat comprise the collateral whichthat maintains in force at all times errors and omissions insurance applicable to the trust or agency activities, including without limitation, a servicer qualified under a federal or state insurance or guaranty program to service loans or mortgage loans. The commissioner may adopt regulations, bulletins, notices or orders to limit the amount of collateral provided by obligations, letters of credit, or credit default swaps, or to limit the amount of collateral provided by any single issuer, bank, or counterparty as provided for in this subdivision. The commissioner may also require additional reporting as deemed necessary. (f) "Commercial real estate" means income-producing real property other than residential property consisting of less than five units. (g) "Contingency reserve" means an additional liability reserve established to protect policyholders against the effects of adverse economic cycles or other unforeseen circumstances. (h) "Credit default swap" means an agreement referencing credit derivative definitions published from time to time by the International Swap and Derivatives Association, Inc., or otherwise acceptable to the commissioner, pursuant to which a party agrees to compensate another party in the event of a payment default by, insolvency of, or other adverse credit event in respect of, an issuer of a specified security or other obligation; provided that the agreement does not constitute an insurance contract and the making of the credit default swap does not constitute the transaction of insurance. (i) "Excess spread" means, with respect to any insured issue of asset-backed securities, the excess of (A) the scheduled cashflow on the underlying assets that is reasonably projected to be available, over the term of the insured securities after payment of the expenses associated with the insured issue, to make debt service payments on the insured securities over (B) the scheduled debt service requirements on the insured securities, provided that this excess is held in the same manner as collateral is required to be held under subdivision (e). (j) "Financial guaranty insurance corporation" means an insurer transacting financial guaranty insurance. (k) "Governmental unit" means a state, territory, or possession of the United States of America, the District of Columbia, the country of Canada, a province of Canada, the United Kingdom, a public authority of the United Kingdom, a member country of the Organization for Economic Co-operation and Development having a sovereign rating in one of the top two generic lettered rating classifications by a securities rating agency acceptable to the commissioner, a municipality, or a political subdivision of any of the foregoing, or any public agency or instrumentality thereof. (l) "Guarantees of consumer debt obligations" means insurance policies indemnifying a purchaser or lender against loss or damage resulting from defaults on a pool of debts owed for extensions of credit (including in respect of installment purchase agreements and leases) to individuals provided in the normal course of the purchaser' s or lender's business, provided that the pool meets the requirements of paragraph (2) of subdivision (c) and that the pool has been determined to be investment grade. Policies providing that coverage shall contain a provision that all liability terminates upon sale or transfer of the underlying obligation to any transferee that is not an insured of the financial guaranty insurance corporation under a similar policy. (m) "Industrial development bond" means any security, or other instrument under which a payment obligation is created, issued by or on behalf of a governmental unit to finance a project serving a private industrial, commercial, or manufacturing purpose and not guaranteed by a governmental unit. (n) "Insurable risk" means that the obligation on an uninsured basis has been determined to be not less than investment grade. With respect to asset-backed securities as defined in subdivision (c), the determination shall be, based solely on the pool of assets backing the insured obligation or securing the financial guaranty insurance corporation, without consideration of the creditworthiness of the issuer. (o) "Investment grade" means that the obligation or parity obligation of the same issuer is rated in one of the top four generic lettered rating classifications by a securities rating agency acceptable to the commissioner, that the obligation or parity obligation of the same issuer, without regard to financial guaranty insurance, has been identified in writing by that rating agency as an insurable risk deemed to be of investment grade quality, or that the obligation or parity obligation of the same issuer has been determined to be investment grade (as indicated by a category 1 or 2 rating) by the Securities Valuation Office of the National Association of Insurance Commissioners. (p) "Municipal bonds" means municipal obligation bonds and special revenue bonds. (q) (1) "Municipal obligation bond" means any security, or other instrument, including a lease payable or guaranteed by the United States or another national government that qualifies as a governmental unit, or any agency, department, or instrumentality thereof, or by a state or an equivalent subdivision of another national government that qualifies as a governmental unit, but not a lease of any other governmental unit, under which a payment obligation is created, issued by or on behalf of a governmental unit or issued by a special purpose corporation, special purpose trust, or other special purpose legal entity to finance a project or undertaking serving a substantial public purpose, and whichthat is one or more of the following: (A) Payable from tax revenues, but not tax allocations, within the jurisdiction of the governmental unit. (B) Payable or guaranteed by the United States of America or another national government that qualifies as a governmental unit, or any agency, department, or instrumentality thereof, or by a housing agency of a state or an equivalent political subdivision of another national government that qualifies as a governmental unit. (C) Payable from rates or charges (but not tolls) levied or collected in respect of a nonnuclear utility project, public transportation facility (other than an airport facility) or public higher education facility. (D) With respect to lease obligations, payable from past, present, or future appropriations. (2) Notwithstanding paragraph (1), obligations of a special purpose corporation, special purpose trust, or other special purpose legal entity shall not be considered municipal obligation bonds unless the obligations are investment grade at the time of issuance, the obligations are payable from sources enumerated in subparagraphs (A) to (D), inclusive, and the project being financed or the tolls, tariffs, usage fees, or other similar rates or charges for its use are subject to regulation or oversight by a governmental entity. (r) "Parent" means a person that, directly or indirectly, owns at least 50 percent of a financial guaranty insurance corporation. (s) "Reinsurance" means cessions qualifying for credit under Section 12121. (t) "Security" or "secured" means any of the following: (1) A deposit at least equal to the full amount of the outstanding principal of the insured obligation. (2) Collateral, as defined by subdivision (e), at least equal to the full amount of the outstanding principal of the insured obligation or that has a market value or scheduled cashflow whichthat is equal to or greater than the scheduled debt service on the insured obligation. (3) Property, provided the financial guaranty insurance corporation or the trustee has possession of evidence of the right, title, or authority to claim or foreclose thereon or otherwise dispose of the property for value, the scheduled cashflow from which, or market value thereof, is at least equal to the scheduled debt service on the insured obligation. (u) "Special revenue bond" means any security or other instrument under which a payment obligation is created, issued by or on behalf of, or payable or guaranteed by, a governmental unit to finance a project or undertaking serving a substantial public purpose and not payable from the sources enumerated in subdivision (q) or securities whichthat are substantially similar to the foregoing issued by any of the following: (1) A not-for-profit corporation. (2) A special purpose corporation, special purpose trust or other special purpose legal entity, provided that the obligations are investment grade at the time of issuance, the obligations are not payable from the sources enumerated in subparagraphs (A) to (D), inclusive, of paragraph (1) of subdivision (q), and the project being financed or the tolls, tariffs, usage fees, or other similar rates or charges for its use are subject to regulation or oversight by a governmental entity. (v) "Subsidiary" means a person that, directly or indirectly, is at least 50 percent owned by a financial guaranty insurance corporation. (w) "Total net liability" of a financial guaranty insurance corporation means the aggregate amount of insured unpaid principal, interest, and other monetary payments, if any, of guaranteed obligations insured or assumed, less reinsurance and less collateral. (x) "Utility first mortgage obligation" means an obligation of an issuer secured by a first priority mortgage on property owned or leased by an investor-owned or cooperative-owned utility company and located in the United States, Canada, or a member country of the Organization for Economic Co-operation and Development having a sovereign rating in one of the top two generic lettered rating classifications by a securities rating agency acceptable to the commissioner, provided that the utility or utility property or the usage fees or other similar utility rates or charges are subject to regulation or oversight by a governmental entity. SEC. 18. Chapter 2 (commencing with Section 12420) of Part 6 of Division 2 of the Insurance Code is repealed. SEC. 19. Section 12961 of the Insurance Code is repealed. 12961. (a) The commissioner shall provide to the Governor, the Legislature, and to the committees of the Senate and Assembly having jurisdiction over insurance an analysis of the following types of actions in the annual report submitted pursuant to Section 12922: (1) Medical malpractice actions. (2) Toxic substance tort actions. (3) Product and design liability actions. (4) Tort actions in which a public entity is a defendant. (5) Tort actions involving judgments or settlements of one million dollars ($1,000,000) or more. (6) Class action tort actions. (7) Defamation and invasion of privacy actions. (8) Other categories of tort actions involving commercial liability claims as the commissioner deems necessary. (b) The study may exclude actions in which the only defendant is an individual sued in his or her private capacity. The study may exclude limited civil cases. (c) If any of the information required to be provided by the parties is confidential under any other provision of law or pursuant to any court order, the commissioner shall keep that information confidential and shall limit its analysis of that information to aggregate data or other analyses which will not reveal the identity of the parties.SEC. 20. Section 12962 of the Insurance Code is amended to read: 12962. The commissioner shall report to the Governor, the Legislature, and to the committees of the Senate and Assembly having jurisdiction over insurance all of the following in the annual report submitted pursuant to Section 12922: (a) An analysis of the information required by Sections 674.5, 1857.7, 1857.9 , 1864, and 12963, including, but not limited to, all of the following: (1) An aggregate and an average for all insurers for each item of information required by these sections. (2) The number of insurers reporting policies written for each class during the calendar year. (3) For each class, the number of insurers reporting a combined loss ratio of 100 percent or more, and the number reporting a combined loss ratio of under 100 percent. (4) An analysis of adjustments made to loss reserves for prior years. (5) The change in any item required to be included by paragraphs (1) to (4), inclusive, from the immediately prior year. (b) An analysis of the activities of the Department of Insurancedepartment in implementing the provisions of Proposition 103 on the November 8, 1988, general election ballot, as set forth in Article 10 (commencing with Section 1861.01) of Chapter 9 of Part 2 of Division 1. (c) Recommendations and proposals, including suggested legislation, to protect consumers from arbitrary insurance rates and practices, to encourage a competitive insurance marketplace, to provide for an accountable Insurance Commissionercommissioner , and to ensure that insurance is fair, available, and affordable for all Californians. (d) The requirements of this section shall be satisfied if the analysis required by this section is included in the annual report to the Governor required by Section 12922, and a copy of that report is provided to the Legislature.