Bill Text: CA AB2303 | 2011-2012 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Insurance omnibus.
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Passed) 2012-09-29 - Chaptered by Secretary of State - Chapter 786, Statutes of 2012. [AB2303 Detail]
Download: California-2011-AB2303-Amended.html
Bill Title: Insurance omnibus.
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Passed) 2012-09-29 - Chaptered by Secretary of State - Chapter 786, Statutes of 2012. [AB2303 Detail]
Download: California-2011-AB2303-Amended.html
BILL NUMBER: AB 2303 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 15, 2012
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, 1639, 1670, 1685, 1687, 1704,
1749.1, 1750, 1751, 1758.1, 1759.10, 1765.4, 1810.7, 1851,
1864, 12100, and 12962 of, to add Section 1011.1 to, to add
Article 7.5 (commencing with Section 14085) to Chapter 1 of Division
5 of, to repeal Sections 117 , 1688, 1689, 1691, 1692.1,
1695, 1699, 1700, 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 amended, 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 authorizes the commissioner to grant authority to
transact variable contracts to a person, or a natural person named
on a license of an organization licensed, as a life agent which is
appointed by an admitted insurer which is required to register itself
or to register a separate account or fund with the United States
Securities and Exchange Commission, or to register its variable
policies or contracts with the Securities and Exchange Commission,
and has complied with that requirement.
This bill would clarify that the commissioner is authorized to
grant authority to transact variable contracts to a nonresident, who
is not a licensed life agent in California, as long as the
nonresident is licensed for both life and variable contract authority
in his or her resident state. The bill would also impose a $64 fee
on applications, renewals, or changes for a nonresident variable
contract authority license. The bill would declare the fee is
reasonable and reflects the true costs incurred by the agency in
providing those services.
(4) Existing law authorizes the commissioner to issue to eligible
persons a certificate of convenience, a temporary permit issued as a
matter of convenience to allow the transaction of insurance without a
permanent license, to transact certain kinds of insurance,
including, but not limited to, transacting industrial life and
industrial disability insurance, known as certificates of convenience
pending examination. Existing law requires every insurer to have an
approved training program on file with the commissioner or have filed
a blanket authorization to certify enrollment in an approved course
of instruction before appointing any certificate of convenience
holder.
This bill would discontinue certificates of convenience pending
examination, delete the training program and blanket authorization to
certify enrollment requirement, and make conforming changes.
(5) Existing law requires an applicant for a bail agent license,
in order to be eligible to take the examination, to have completed
not less than 12 hours of classroom education in subjects pertinent
to the duties and responsibilities of a bail licensee. Existing law
requires the commissioner to appoint a curriculum board consisting of
representatives of insurance agents, brokers, and life agents trade
associations and representatives of insurance companies and consumer
groups to develop the prelicensing and continuing education
curriculum for property broker-agents and casualty broker-agents.
This bill would increase the bail agent license exam eligibility
qualification to a minimum of 20 hours. The bill would expand the
curriculum board to include representatives of bail agents and
insurance adjusters and expand the curriculum being developed to
include courses of study for bail agents and insurance adjusters.
(6) Existing law requires any natural person applying for a
license to act as a surplus line broker to prove his or her
competency by showing he or she holds an existing license to act as a
property broker-agent and casualty broker-agent.
This bill would allow a natural person, who is not a resident of
California, to prove his or her competency by showing that he or she
holds an existing license for property and casualty in his or her
resident state.
(3)
(7) 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.
(8) Existing law requires insurance adjusters to be licensed by
the department. Any person who violates any provision regarding the
regulation of insurance adjusters is guilty of a misdemeanor.
This bill would establish a category of insurance adjuster license
to be known as the crop insurance adjuster license, subject to the
same rules and regulations as an insurance adjuster, except where
otherwise specified. A person would be prohibited from acting as a
crop insurance adjuster without a license. An applicant for a crop
insurance adjuster license would be subject to the same requirements
as applicable to obtaining an insurance adjuster license, except the
examination, and would be required to provide evidence that he or she
has satisfactorily completed the loss adjustment training curriculum
and competency testing required by the Federal Crop Insurance
Corporation Standard Reinsurance Agreement. Because this bill would
expand the scope of a crime, it would create a state-mandated local
program.
(4)
(9) The bill would also make technical,
conforming , and related changes and delete obsolete
provisions.
(10) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares that
the fees to be collected from each nonresident variable contract
authority applicant and licensee for filing an application, renewal,
or change in an outstanding license, as set forth in Section 29, are
reasonable and reflect the true costs incurred by the agency in
providing those services.
SECTION 1. SEC. 2. 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) Reserved]
(18) Aircraft
(19) Mortgage guaranty
(19.5) Insolvency
(19.6) Legal insurance
(20) Miscellaneous
SEC. 2. SEC. 3. Section 117 of the
Insurance Code is repealed.
SEC. 3. SEC. 4. 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) 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.
(c) This section shall not apply to nonrenewal.
SEC. 4. SEC. 5. 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; and for
mortgage guaranty insurers by Section 12640.03.
SEC. 5. SEC. 6. 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, 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. SEC. 7. 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 (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 the
aggregate "paid-in capital" or "capital paid in" required by this
code after making provision for all those liabilities and for that
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 shall 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. SEC. 8. 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, upon the
filing by the commissioner of the verified application showing any of
the conditions in 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, 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 the
person, or so much thereof as to the commissioner may seem
appropriate, and enjoining the person and its officers, directors,
agents, servants, and employees from the transaction of its business
or disposition of its property until any of the following further
order of the court:
(1) That the 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.
(2) That the 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.
(3) That the 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
consent, 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.
(4) That the 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.
(5) That the person has violated its charter or any law of the
state.
(6) That any officer of the person refuses to be examined under
oath, touching its affairs.
(7) That any officer or attorney in fact of the person has
embezzled, sequestered, or wrongfully diverted any of the assets of
the person.
(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.
(9) That the last report of examination of any person to whom the
provisions of this article apply shows the 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. SEC. 9. 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. SEC. 10. Section 1012 of the
Insurance Code is amended to read:
1012. Except in the case of an order issued based on a verified
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 that person, it shall,
after a full hearing, appear to the court that the ground for the
order directing the commissioner to take title and possession does
not exist or has been removed and that the person can properly resume
title and possession of its property and the conduct of its
business.
SEC. 10. SEC. 11. Section 1016 of
the Insurance Code is amended to read:
1016. (a) If at any time after the issuance of an order under
Section 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 that person, he or she may apply to
the court for an order to liquidate and wind up the business of the
person. Upon a full hearing of that application, the court may make
an order directing the winding up and liquidation of the business of
that person by the commissioner, as liquidator, for the purpose of
carrying out the order to liquidate and wind up the business of that
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. SEC. 12. Section 1022 of
the Insurance Code is amended to read:
1022. The notice shall be published in newspapers of general
circulation in 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
publication, shall be filed with the clerk of the court.
SEC. 12. SEC. 13. 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 shall file a report of each examination with the
court in which the respective proceeding is pending and shall furnish
the commissioner a certified copy of each report. The expense of
examining the books and accounts of the commissioner as conservator
or liquidator under this article shall be paid out of the support
appropriation for the Department of Insurance current at the date of
billing for the expense and shall, upon order of the court or courts
before which the proceedings under the articles are pending, be
ratably reimbursed to that appropriation out of the assets of the
estates administered by the commissioner as conservator or liquidator
under this article.
SEC. 13. SEC. 14. 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 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 729) of Chapter 1 of Part 2 of Division 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. SEC. 15. 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 (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) The 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 the
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) The 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 the
period, and shall timely pay all taxes found to be due on account of
the business; and
(d) The 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 that has been liquidated by a final
order of a court of record of this or any sister state provided a
certified copy of the order reciting the fact of liquidation and
discharge of all obligations has been filed with the commissioner.
SEC. 16. Section 1639 of the Insurance
Code is amended to read:
1639. The following types of licenses under this chapter may be
issued to nonresidents:
(a) A property broker-agent or a casualty broker-agent if the
nonresident is duly licensed to transact those lines of insurance
described in Section 1625, under the laws of the state, territory of
the United States, or province of Canada where the resident license
is maintained.
(b) A personal lines broker-agent if the nonresident is duly
licensed to transact those lines of insurance described in Section
1625.5, under the laws of the state, territory of the United States,
or province of Canada where the resident license is maintained.
(c) A life-only agent or an accident and health agent if the
nonresident possesses a resident license in another state, territory
of the United States, or province of Canada to transact life
insurance or disability insurance.
(d) A nonresident life-only agent may be
granted authority to transact variable contracts if he or she has
been granted that authority by the state where the resident license
is maintained. To qualify for this authority, the nonresident is
required to also be licensed as a life-only agent in the state where
the resident license is maintained.
(e) A surplus line broker and a special lines surplus broker if
the nonresident holds that type of license in the state or territory
of the United States where the resident license is maintained.
(f) A credit insurance agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(g) A rental car agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(h) A cargo shipper's agent if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained.
(i) A limited lines license if the nonresident holds that type of
license in the state, territory of the United States, or province of
Canada where the resident license is maintained. As used in this
section, "limited lines license" means any authority granted by the
resident state that restricts the authority of the license to less
than the total authority granted by any of the types of licenses
identified in this section.
(j) A self-service storage agent if the nonresident holds that
type of license in the state, territory of the United States, or
province of Canada where the resident license is maintained.
SEC. 17. Section 1670 of the Insurance
Code is amended to read:
1670. If an applicant for any license under this chapter, within
one year from the date of the receipt by the commissioner of the
application, whether or not the filing is complete, or within one
year from the date of the issuance to him or her of a
certificate of convenience, if any, whichever is the later date,
neither fully qualifies for and receives such
that license on a permanent basis, nor is denied its issue,
such the application is automatically
denied without prejudice to the filing of a new application for
such the license unless in a proceeding
under a statement of issues the commissioner for good cause
determines such the denial should be
set aside or stayed. Nothing in this section shall nullify
Section 1695 to extend the expiration date of a certificate of
convenience.
SEC. 18. Section 1685 of the Insurance
Code is amended to read:
1685. The commissioner may issue to a person eligible
therefor an eligible person a certificate of
convenience to act as any of the following:
(a) Any type of a licensee under this chapter or Chapter 6
(commencing with Section 1760), Chapter 7 (commencing with
Section 1800), or Part 5 (commencing with Section 121401) of
Division 2 to administer the business of a licensed person who has
died or who has been declared incompetent by the judgment of a court
of competent jurisdiction. That certificate of convenience may be
denominated an estate certificate of convenience.
(b) Any type of a licensee under this chapter or Chapter 6
(commencing with Section 1760), Chapter 7 (commencing with
Section 1800), or Part 5 (commencing with Section 121401) of
Division 2 to conserve the business of a licensed natural person who
enters the military service of the United States or to conserve the
business of an organization under the conditions specified in Section
1697. That certificate of convenience may be denominated a military
service certificate.
(c) An industrial debit collection certificate holder to transact
industrial life and industrial disability insurance.
(1) "Industrial life insurance" means life insurance with an
aggregate face amount sold to any one insured and in force at any one
time in an amount not exceeding ten thousand dollars ($10,000);
premiums are payable at least monthly; premiums are collected in
person and not by mail or otherwise by the industrial debit
collection certificate holder with a written receipt delivered to the
insured, and the words "INDUSTRIAL LIFE POLICY" or "MONTHLY DEBIT
ORDINARY" are printed on the policy as part of the descriptive
matter.
(2) "Industrial disability insurance" means disability insurance
with premiums payable at least monthly at a rate not greater than
fifteen dollars ($15) per person, per month; premiums are collected
in person and not by mail or otherwise by the industrial debit
collection certificate holder with a written receipt delivered to the
insured and with the words "INDUSTRIAL POLICY" printed on the policy
as part of the descriptive matter.
(3) An industrial debit collection certificate holder may collect
premiums on insurance policies not solicited by him or her so long as
the premiums are collected in person and not by mail or otherwise by
the certificate holder at least once a month and the insured is
issued a written receipt for the premium payment thereof.
(4) An industrial debit collection certificate holder shall be
subject to the provisions of this code regulating the conduct of life
agents.
Certificates of convenience issued pursuant to subdivision (c) may
be denominated certificates of convenience pending examination.
SEC. 19. Section 1687 of the Insurance
Code is amended to read:
1687. Except as provided in Section 1637, to be eligible for a
military service certificate of convenience, a person must
is required to be nominated therefor by the
holder of a permanent license who, while the holder thereof
, entered the military service of the United States.
"Military service" and "persons in the military service"
have the meanings ascribed to them has the meanings
ascribed to it by Section 101 of the
Soldiers' and Sailors' Relief Act of 1940
Servicemembers Civil Relief Act of 2003 (Public Law 108-189) .
SEC. 20. Section 1688 of the Insurance
Code is repealed.
1688. To be eligible for a certificate of convenience to act as
an industrial debit collection certificate holder, a person must be
an applicant for a permanent license to act as a life-only agent or
an accident and health agent. An industrial debit collection
certificate shall be issued only to act in the capacity for which the
license is sought.
SEC. 21. Section 1689 of the Insurance
Code is repealed.
1689. (a) A person is not eligible for a certificate of
convenience pending examination if the person has ever been issued in
California a certificate of convenience or permanent license, nor
unless appointing insurers, certify to the commissioner that the
person is enrolled in and will pursue a course of study and
instruction previously approved by the commissioner.
(b) In the event the applicant obtains more than one appointment,
all appointing insurers shall certify that the applicant is enrolled
in, and pursues, the training course. Each appointing insurer
subsequently appointing the applicant shall be equally responsible
for the continuation of the study and instruction.
SEC. 22. Section 1691 of the Insurance
Code is repealed.
1691. (a) Every insurer shall have an approved training program
on file with the commissioner or have filed a blanket authorization
to certify to enrollment in an approved course of instruction before
appointing any certificate of convenience holder. No training course
may be used to qualify an applicant for a certificate of convenience
unless it is first approved by the commissioner. Before approving any
such course the commissioner shall be satisfied that it meets all
the following requirements:
(1) That it covers the fundamentals of insurance, insurance
regulation, and instruction in those classes of insurance in which
the applicant will be licensed.
(2) That it contains a system of examinations or progress checks
whereby it can be determined whether the person is taking the course
in good faith and obtaining information and training. That
examinations or progress checks shall be in writing, be completed by
the certificate holder, and be kept on file in the state for a period
of two years.
(b) The approval of a course of study and instruction may be
withdrawn by the commissioner if he or she finds after notice and
hearing that either:
(1) The course as administered does not meet the requirements for
its approval.
(2) The content of the course is not then adequate to meet the
requirements hereinabove set forth.
(c) Upon withdrawal of approval of the course the commissioner
shall after notice and hearing forthwith call all holders of
certificates of convenience who are enrolled in the course for
examination and shall not issue any certificate of convenience to any
person enrolled in the course until the course has been revised,
resubmitted to, and reapproved by the commissioner.
SEC. 23. Section 1692.1 of the Insurance
Code is repealed.
1692.1. (a) The privilege of an insurer to certify to the
enrollment of applicants in any course of study and instruction shall
be automatically suspended without any action by the commissioner
whenever more than 662/3 percent of its holders of certificates of
convenience during the calendar year fail to qualify for permanent
licenses during a period of six months following issuance of a
certificate of convenience to each such holder. Any suspension shall
continue until the commissioner is satisfied that the insurer has
taken adequate action to prevent a recurrence of the failure to
qualify the requisite percentage of certificate of convenience
holders for permanent licenses.
(b) Each insurer who has an approved training course on file with
the commissioner pursuant to Section 1691 or a blanket authorization
to certify enrollment in an approved course of instruction, shall
keep and maintain complete records on each appointed certificate of
convenience holder and shall file annually with the commissioner on
or before August 15 a written report which shall contain, by type of
certificate specified in Section 1685, all of the following:
(1) The number of certificate of convenience holders appointed
during the preceding calendar year.
(2) The number of certificate of convenience holders who qualified
for permanent licenses within the specified six-month period.
(3) The percentage of certificate of convenience holders who
qualified for permanent licenses within the specified six-month
period.
(c) Any such insurer who fails to report on or before August 15 or
who files an incomplete report shall automatically be suspended
until a complete report is filed in accordance with subdivision (b).
All suspensions pursuant to this section shall commence on the final
date the report is required to be filed. During any period of
suspension of the privilege the insurer or broker-agent is also
prohibited from appointing any holder of a certificate of convenience
appointed by another insurer. The commissioner may, after notice and
hearing suspend the privilege of any parent, subsidiary, affiliate
or controlled insurer to prevent avoidance of the suspension.
(d) At the time of filing the written report required by this
section, an insurer which has failed to qualify the required
percentage of certificate of convenience holders for permanent
licenses may as a part of the report do any of the following:
(1) Furnish written evidence of mitigating relevant facts.
(2) Furnish written evidence of corrective action taken, or a
written description of action proposed, which should result in future
compliance with this section.
(3) Request termination of the automatic suspension for specified
reasonable cause.
(4) Request that a hearing be held to determine whether the
automatic suspension should be annulled or confirmed.
(e) The commissioner may after notice and hearing stay, annul,
reduce, terminate or confirm the time of the automatic suspension
otherwise required in this section upon a showing, satisfactory to
the commissioner, that there is good cause therefor, and that
corrective action has been taken to prevent a recurrence of the
failure to qualify the requisite percentage of certificate of
convenience holders for permanent licenses. The preventive measures
shall include the establishment of procedures both to assure proper
training to enable certificate holders to pass the qualifying license
examination and to insure proper selection of prospective
certificate holders to the end that a reasonable proportion of those
selected will in good faith pursue the course of study and pass the
qualifying examination.
(f) Except for subdivisions (b) and (c), this section shall not
apply to an insurer during any calendar year in which the insurer
appointed 25 or fewer of those certificate of convenience holders.
(g) Any hearing under this article shall be conducted in
accordance with the provisions of Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code, and
the commissioner shall have all the powers granted therein.
(h) The commissioner's power of termination of the certificate of
convenience privilege pursuant to Section 1692.1 shall be exercised
when 50 percent or more of the holders of certificates of convenience
issued during the calendar year beginning January 1, 1978, fail to
qualify for permanent licenses. That power of termination shall be
exercised when 25 percent or more of the holders of certificates of
convenience issued during the calendar year beginning January 1,
1979, fail to qualify for permanent licenses.
SEC. 24. Section 1695 o f the
Insurance Code is repealed.
1695. A certificate of convenience to act as an industrial debit
certificate holder or pending examination expires at one of the
following times, whichever occurs first:
(a) Two days after the mailing of notice of failure of the
qualifying examination; or
(b) Six months after the issuance of the certificate of
convenience.
SEC. 25. Section 1699 of the Insurance
Code is repealed.
1699. A person holding a certificate of convenience pending
examination who passes the qualifying examination and is otherwise
eligible for the permanent license applied for is eligible to receive
such permanent license provided that, if such permanent license is
to be issued for a license period for which the license fee has not
been paid, such license shall not be issued until the required fee
has been paid; and provided further that unless such fee is paid
within 60 days after mailing to him of a notice of such eligibility
such fee shall be increased by an amount equal to the fee for one
license year for such license and eligibility for such license shall
in all events terminate unless exercised within one year following
passing of the qualifying examination. This section shall not operate
to extend any certificate of convenience pending examination beyond
six months after the issuance thereof and the person who held the
same shall be deemed unlicensed for all purposes during the period
between the termination of such certificate and the actual issuance
of such permanent license.
SEC. 26. Section 1700 of the Insurance
Code is repealed.
1700. If the holder of any certificate of convenience pending
examination fails the qualifying examination by reason of his failure
to appear for examination, the commissioner may after notice and
hearing require the cancellation of any or all contracts of insurance
transacted by or through the holder of such certificate of
convenience and may cancel the certificate of authority of any
insurer which fails to comply with such order.
SEC. 27. Section 1704 of the Insurance
Code is amended to read:
1704. (a) Any person acting as a licensee under this chapter
shall not act as an agent of an insurer unless the insurer has filed
with the commissioner a notice of appointment, executed by the
insurer, appointing the licensee as the insurer's agent. Every
property broker-agent, casualty broker-agent, personal lines
broker-agent, or limited lines automobile insurance agent acting in
the capacity of an insurance solicitor shall have filed on his or her
behalf with the commissioner a notice executed by an insurance agent
or insurance broker appointing and agreeing to employ the solicitor
as an employee within this state. Additional notices of appointment
may be filed by other insurers before the license is issued and
thereafter as long as the license remains in force. The authority to
transact insurance given to a licensee by an insurer, property
broker-agent, casualty broker-agent, personal lines broker-agent, or
limited lines automobile insurance agent, as the case may be, by
appointment shall be effective as of the date the notice of
appointment is signed. That authority to transact shall apply to
transactions occurring after that date and for the purpose of
determining the insurer's, property broker-agent's, casualty
broker-agent's, personal lines broker-agent's, or limited lines
automobile insurance agent's liability for acts of the appointed
licensee. No notice of appointment of a life agent, property
broker-agent, casualty broker-agent, personal lines broker-agent,
limited lines automobile insurance agent, or travel insurance agent
shall be filed under this subdivision unless the licensee being
appointed has consented to that filing. Each appointment made under
this subdivision shall by its terms continue in force until:
(1) The cancellation or expiration of the license applied for or
held at the time the appointment was filed.
(2) The filing of a notice of termination by the insurer or
employing property broker-agent or casualty broker-agent, or by the
appointed life agent, property broker-agent, casualty broker-agent,
travel insurance agent, or insurance solicitor.
(b) Upon the termination of all appointments, or all endorsements
naming the licensee on the license of an organization licensee, and
the cancellation of the bond required pursuant to Section 1662 if
acting as a broker, the permanent license shall not be canceled, but
shall become inactive. It may be renewed pursuant to Section 1718. It
may be reactivated at any time prior to its expiration by the filing
of a new appointment pursuant to this section, Section 1707, and
Section 1751.3, or the filing of a new bond pursuant to Section 1662.
An inactive license shall not permit its holder to transact any
insurance for which a valid, active license is required.
(c) Upon the termination of all appointments of a person licensed
under a certificate of convenience, that certificate shall be
canceled and shall be returned by its lawful custodian to the
commissioner.
(d) A property broker-agent or a casualty broker-agent appointing
an insurance solicitor pursuant to this section, if a natural person,
shall be the holder of a permanent license to act as such a
broker-agent or the holder of a certificate of convenience so to act
issued pursuant to either subdivision (a) or (b) of Section 1685. If
the property broker-agent or the casualty broker-agent is an
organization, it shall be the holder of a permanent license.
(e) The filing of an incomplete or deficient action notice with
the department shall require the filing of an amended, complete
action notice, together with the payment of the fee therefor
specified in subdivision (m) (l) of
Section 1751.
(f) A notice of appointment appointing a solicitor may be filed by
a second or subsequent property broker-agent or casualty
broker-agent. The broker-agent seeking to appoint the solicitor shall
enter into an agreement with all other property broker-agents and
casualty broker-agents with whom the insurance solicitor has an
existing appointment. The agreement shall govern how the
broker-agents will determine on which property broker-agent's or
casualty broker-agent's behalf the solicitor is working when dealing
with individuals who are customers of none of the property
broker-agents and casualty broker-agents with whom the solicitor has
an appointment. If the agreement does not identify which broker-agent
or broker-agents are liable for the act of the solicitor, all
property broker-agents and casualty broker-agents with whom the
solicitor is appointed at the time of the act shall be jointly and
severally liable for that act.
SEC. 28. Section 1749.1 of the Insurance
Code is amended to read:
1749.1. (a) The commissioner shall appoint a curriculum board
consisting of representatives of insurance agents, brokers, and life
agents trade associations and ,
representatives of insurance companies and ,
consumer groups
, bail agents, and insurance adjusters to develop the
prelicensing and continuing education curriculum, including a list of
preapproved courses of study, including courses of study for
professional designations which that
would satisfy the requirements of this article , subdivision (a)
of Section 1810.7, and Sections 14090.1 and 15059.1 . The
curriculum board shall develop or recommend courses of study covering
all lines of insurance to be sold under each license including, but
not limited to, any special products such as long-term care
insurance, Medi-gap policies, disability insurance products, and
course study on ethics and pertinent sections of this code. The
curriculum developed and the courses of study approved by the board
shall be submitted to the commissioner for final approval.
(b) The curriculum board shall also develop standards for
providers and instructors of prelicensing and continuing education
courses, programs, and seminars, which standards shall be approved by
the board and submitted to the commissioner for final approval. The
curriculum board may approve standards for courses in business
management practices which that may
consist of up to 25 percent of the agent or broker requirements for
license renewal. No prelicensing or continuing education course shall
include sales training, motivational training, self-improvement
training, or training offered by insurers or agents regarding new
products or programs.
(c) For purposes of applying subdivision (b), courses in "business
management practices" shall consist of the following subject matter:
(1) Accounting and financial management, including trust account
maintenance, reconciliation and auditing, financial statements,
business budgeting, income and expense ratios, banking and investment
practices, and business perpetuation and planning.
(2) Information and database management, including recordkeeping,
privacy law, and other legal requirements covering the use of
information.
(3) Human resource management, including employee compliance
supervision, recruitment, training, and licensing.
(4) Customer service management, consisting of methods to improve
handling of consumer inquiries and complaints.
(5) Communication skills, consisting of methods to improve writing
and verbal skills for communication with clients, employees,
insurance carriers, claims departments, and regulators.
(d) Whenever the commissioner has reasonable cause to believe, and
determines after public hearing, that any approved course, program
of instruction, or seminar is being conducted so as to fail to meet
the commissioner's prelicensing or continuing education curriculum,
or any provider or instructor for any course, program, or seminar has
failed to comply with the commissioner's standards, the commissioner
may make and serve upon the provider or instructor of that course,
program, or seminar an order or orders rescinding approval for that
provider, course, program, or seminar, or imposing fines and
penalties on that provider, or both. The amount of any fines and
penalties shall not exceed the amounts set forth in Section 1748, and
shall be based on the criteria for assessing penalties specified in
that section. No credit towards meeting the requirements of this
article shall be granted any applicant or licensee for completion of
a course, program, or seminar after the effective date of any order
rescinding approval for that course, program, or seminar. The
commissioner shall serve notice of hearing required by this section
upon the provider or instructor of the course, program, or seminar,
stating the time and place therefor, and the grounds upon which his
or her order is made. The hearing shall occur not less than 30 nor
more than 60 days after notice is served.
(e) The commissioner may impose monetary penalties for minor
instances of noncompliance with the standards established pursuant to
this article, such as late course roster submissions and late course
presentation schedules. The monetary penalties shall not exceed the
amounts of the fees established pursuant to Section 1751.1. The
commissioner shall adopt regulations to establish the monetary
penalties to be levied against providers for late filings and other
minor instances of noncompliance with this article and Article 6.5
(commencing with Section 2186) of Subchapter 1 of Chapter
5 of Title 10 of the California Code of Regulations.
SEC. 29. Section 1750 of the Insurance
Code is amended to read:
1750. The commissioner shall require in advance as a fee for
filing application for the hereinafter designated licenses, renewals
thereof, or changes in outstanding licenses, an amount calculated as
set forth herein. The fee is determined by multiplying the number of
license years in the period of the license applied for or the
remaining period of an existing license counting any initial
fractional license year of that period as one year for that purpose,
as follows:
(a) Casualty broker-agent, fifty-six dollars ($56).
(b) Property broker-agent, fifty-six dollars ($56).
(c) Property and casualty broker-agent, when applied for on a
single application, fifty-six dollars ($56).
(d) Personal lines broker-agent, resident, fifty-six dollars
($56).
(e) Life agent, resident, fifty-six dollars ($56).
(f) Life agent, nonresident, fifty-six dollars ($56).
(g) Surplus line broker who is an individual transacting only on
behalf of a surplus line broker organization, two hundred fifty
dollars ($250).
(h) Surplus line broker not described in subdivision (e), five
hundred dollars ($500).
(i) Variable contract authority, nonresident, when not also
applying for a nonresident life agent license, sixty-four dollars
($64).
SEC. 30. Section 1751 of the Insurance
Code is amended to read:
1751. The commissioner shall require, in advance, a fee for
filing the following documents:
(a) Application for registration of change in membership of a
copartnership licensed as any of the following:
(1) Casualty broker-agent, fifty-six dollars ($56).
(2) Property broker-agent, fifty-six dollars ($56).
(3) Property and casualty broker-agent, when applied for on a
single application, fifty-six dollars ($56).
(4) Life agent, resident, forty-eight dollars ($48).
(5) Life agent, nonresident, fifty-three dollars ($53).
(6) Personal lines broker-agent, fifty-six dollars ($56).
(b) Notice for adding or removing from any life agent's, property
broker-agent's, casualty broker-agent's, or personal lines
broker-agent's license issued to an organization the name of any
natural person named thereon, sixteen dollars ($16).
(c) First amendment to an application, eight dollars ($8); a
second and each subsequent amendment to an application, sixteen
dollars ($16).
(d) Original application to be given the qualifying examination
for a license of a property, casualty, or personal lines licensee,
twenty-seven dollars ($27) for each person to be examined.
(e) Original application to be given the qualifying examination
for a license of a life licensee, twenty-seven dollars ($27) for each
person to be examined.
(f) Application for reexamination for any of the licenses
mentioned in this section, twenty-seven dollars ($27) for each person
to be reexamined.
(g) Application which includes a request for a certificate of
convenience pursuant to Article 8 (commencing with Section 1685),
twenty dollars ($20) in addition to, and not in lieu of, fees
otherwise required.
(h) Application or request for approval of a true or fictitious
name pursuant to Section 1724.5, thirty dollars ($30), except that
there shall be no fee when the name is contained in an original
application.
(i) "A ratification of appointments of agents" whereby the
surviving insurer in a merger or consolidation assumes responsibility
for all agents then lawfully appointed for one of the constituent
insurers and makes each its agent, one hundred three dollars ($103).
(j) An application or request for approval of:
(1) A training course pursuant to Section 1691, except when filed
by a degree-conferring college or university, a public educational
institution, or by a private nonprofit educational institution, one
hundred three dollars ($103).
(2) An arrangement whereby an insurer may qualify certificate of
convenience holders pursuant to Section 1691 by means of an approved
course given on the insurer's behalf by a school or organization
other than itself, fifty-five dollars ($55).
(k)
(j) A bond, pursuant to Article 5 (commencing with
Section 1662) or Section 1760.5 or 1765, except when the bond
constitutes part of an original application filing, sixteen dollars
($16).
(l)
(k) An application or request for clearance and
cancellation notice of a current licensee of record, sixteen dollars
($16).
(m)
(l) An amended action notice pursuant to subdivision
(e) of Section 1704, five dollars ($5).
SEC. 31. Section 1758.1 of the
Insurance Code is amended to read:
1758.1. (a) For the purpose of making
provision for the issuance of policies or contracts authorized by
Article 5 (commencing with Section 10506) of Chapter 5 of Part 2
of Division 2, the commissioner may grant authority to
transact variable contracts to a person or a natural person named on
a license of an organization licensed as a life agent which
that is appointed by an admitted insurer
which that is required to register
itself or to register a separate account or fund with the United
States Securities and Exchange Commission under the Federal
Investment Company Act of 1940, or to register its variable policies
or contracts with the Securities and Exchange Commission under the
Federal Securities Act of 1933, and has complied with that
requirement. The commissioner may grant variable contract
authority to a person who is not a resident of California and is not
a licensed life agent in California provided that the person is
licensed for both life and variable contract authority in his or her
resident state.
No
(b) No person shall act as an
agent of the insurer in the transaction of the policies or contracts
unless he or she holds a valid authority under this article.
SEC. 32. Section 1759.10 of the
Insurance Code is amended to read:
1759.10. No A person shall not
act as, or hold himself or herself out to be, an
administrator in this state, other than an adjuster licensed in this
state for the kinds of business for which he or she is
acting as an administrator, unless he or she holds a
certificate of registration as an administrator issued by the
commissioner. Such The certificate
shall be issued, renewed, and held in accordance with, and subject
to, all the provisions applicable to a life agent contained in
Articles Article 6 (commencing with
Section 1666), excluding Sections 1672 and 1673
Section 1672 , Article 10 (commencing with
Section 1708) , excluding Section 1714 ,
Article 11 (commencing with Section 1716), and Article
13 (commencing with Section 1737), excluding Sections
1741 and 1745 Section 1741 , of, and subject to
the fees applicable to resident life agents as set forth in Article
14 (commencing with Section 1750) of, Chapter 5 of this
division . Every administrator shall also comply with
Section 1724.5.
SEC. 33. Section 1765.4 of the
Insurance Code is amended to read:
1765.4. Any natural person applying for a license to act as a
surplus line broker shall prove his or her competency by showing he
or she holds an existing license to act as a property broker-agent
and casualty broker-agent, which requires passing the qualifying
examination for that insurance broker's license. Any natural
person who is not a resident of California may prove his or her
competency by showing that he or she holds an existing license for
property and casualty in his or her resident state.
SEC. 34. Section 1810.7 of the
Insurance Code is amended to read:
1810.7. (a) In order to be eligible to take the examination
required to be licensed under this chapter, the applicant shall have
completed not less than 12 a minimum of 20
hours of classroom education in subjects pertinent to the
duties and responsibilities of a bail licensee, including, but not
limited to, all related laws and regulations, rights of the accused,
ethics, and apprehension of bail fugitives. Additionally, a licensee
shall complete in each two-year license term not less than 12 hours
of continuing education in these subjects prior to renewal of his or
her license.
(b) The commissioner shall approve or disapprove an applicant to
provide education for licensure as required by this section within 90
days of receipt of the applicant's full and complete application.
However, this 90-day period shall be tolled during the pendency of
any investigation of the applicant by the commissioner for an alleged
violation that would, if proven, result in the suspension,
revocation, or denial of the provider's approval to provide
continuing education to bail agents as prescribed in Section 1813.
Failure to disapprove an applicant within this period shall result in
the automatic approval of the application. Approval shall be valid
for two years. The commissioner may, at any time, disapprove any
provider who is not qualified or whose course outlines are not
approved, who is not of good business reputation, or who is lacking
in integrity, honesty, or competency. A provider shall not provide
education for licensure following the expiration of the two-year
approval period unless the commissioner has renewed the provider's
approval. The commissioner shall, at the time of renewal, approve or
disapprove the course outlines and schedule of classes to be
provided.
(c) Providers responsible for providing education for licensure
under this chapter shall consult with the California State Sheriffs'
Association, the California District Attorneys Association, and the
County Counsels Association of California prior to submission of the
course outlines for approval by the commissioner, and these entities
may respond within 30 days of receipt of a request for consultation
from a provider. Providers shall maintain records of their requests
for consultation and any responses from these entities, and make
these records available to the department for review as requested.
The bail license fee shall be increased, the amount of which shall be
determined by the commissioner, which shall be deposited in the
Insurance Fund for the purposes of recovering the administrative
costs for meeting the conditions and purposes of this section.
Providers of education or continuing education shall offer courses to
all applicants at the same course fees.
(d) Any person who falsely represents to the commissioner that
compliance with this section has been met shall be subject, after
notice and hearing, to the penalties and fines set out in Section
1814.
(e) A licensee shall not be required to comply with the continuing
education requirements of this section if the licensee submits proof
satisfactory to the commissioner that he or she has been a licensee
in good standing for 30 continuous years in this state and is 70
years of age or older.
(f) The commissioner may make reasonable rules and regulations
necessary, advisable, and convenient for the administration and
enforcement of this chapter. The rules and regulations may include a
schedule establishing fees to be paid by an applicant seeking
approval to act as a provider and to deliver courses under this
section. Those fees shall be in an amount no greater than fees paid
by applicants providing similar courses to other insurance agents
licensed by the department, as specified in Section 1751.1.
(g) Nothing in this chapter shall preclude completion of the bail
agent continuing education requirements of this section through a
course of instruction offered via the Internet or correspondence.
However, this subdivision shall not be construed to allow completion
of the prelicensing education requirements of this section through a
course of instruction.
(h) Successful completion of the continuing education requirements
by means of an Internet or correspondence course shall require
obtaining a passing grade of at least 70 percent on a written final
examination. The final examination shall be open book and shall be
graded by the approved provider. The provider shall issue
certificates of completion only to those students who have passed the
final examination.
SEC. 15. SEC. 35. 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) Insurance transacted by county mutual fire insurers or county
mutual fire reinsurers.
SEC. 16. SEC. 36. Section 1864 of the
Insurance Code is amended to read:
1864. (a) Each 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 at 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. SEC. 37. 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.
(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 that provide that the life insurer itself
will make specified payments in exchange for specific premiums or
contributions.
(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.
(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 obligations 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.
(I) Any cramdown bond or mortgage repurchase bond, as those
phrases are used by nationally recognized rating agencies in respect
of mortgage-backed securities.
(J) Residual value insurance.
(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 that 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 that 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. The 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), and, in
each case that has a net worth of at least twenty-five million
dollars ($25,000,000). The trustee or agent may also be an approved
or qualified servicer or originator of the kind of assets that
comprise the collateral that 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 that 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 that 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
that 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. SEC. 38. Chapter 2
(commencing with Section 12420) of Part 6 of Division 2 of the
Insurance Code is repealed.
SEC. 19. SEC. 39. Section 12961 of
the Insurance Code is repealed.
SEC. 20. SEC. 40. 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, 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 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 commissioner, 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.
SEC. 41. Article 7.5 (commencing with Section
14085) is added to Chapter 1 of Division 5 of the
Insurance Code , to read:
Article 7.5. Crop Insurance Adjusters
14085. (a) Upon application, the commissioner shall issue a crop
insurance adjuster license to a person who meets both of the
following requirements:
(1) Obtains an insurance adjuster license, with the exception of
the examination requirement of Section 14026.
(2) Provides evidence that he or she has satisfactorily completed
the loss adjustment training curriculum and competency testing
required by the Federal Crop Insurance Corporation Standard
Reinsurance Agreement.
(b) For the purposes of this article, the following definitions
apply:
(1) "Crop insurance" means insurance provided by the private
insurance market that indemnifies for damage to crops from
unfavorable weather conditions, fire, lightning, flood, hail, insect
infestation, disease, or other yield-reducing conditions or perils,
and multiple peril crop insurance reinsured by the federal crop
insurance corporation.
(2) "Crop insurance adjuster" means a person who investigates,
negotiates, or settles crop insurance claims.
(c) A person shall not act as or purport to be a crop insurance
adjuster unless licensed as a crop insurance adjuster.
(d) A person shall not contract, employ, or use any other person
to adjust claims made under a crop insurance policy unless the other
person is licensed as a crop insurance adjuster.
(e) All provisions of this chapter and any regulations adopted
pursuant to this chapter shall apply to crop insurance adjusters,
unless exempted by or in conflict with this article or the
regulations adopted pursuant to this article.
(f) The commissioner may adopt regulations to implement this
article, including, but not limited to, regulations that require
applicants to satisfy other competency requirements in addition to or
instead of those referred to in paragraph (2) of subdivision (a),
and regulations that establish standards of practice for crop
insurance adjusters.
SEC. 42. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.
