Insurance Commissioner Dave Jones Applauds Passage Of SB 1216 By California Senate Insurance Committee
News: 2012 Press Release
Insurance Commissioner Dave Jones today announced that the California Senate Insurance Committee has passed SB 1216, authored by Senator Alan Lowenthal (D-Long Beach), by a vote of 8 to 0. SB 1216, which received bipartisan support, is sponsored by Commissioner Jones and the California Department of Insurance. The proposed legislation updates California reinsurance laws in response to changes in federal law and revisions in the National Association of Insurance Commissioners (NAIC) Reinsurance Model Law and Regulations.
"I am pleased that the Senate Insurance Committee has passed this important legislation to align California's reinsurance laws with federal law and the NAIC revisions relating to reinsurance," Commissioner Jones said. "This legislation will enable the Department to continue to protect California consumers to the best of our ability."
SB 1216 will:
- Specify the criteria for a domiciled insurer to qualify as a professional reinsurer.
- Align existing California insurance law related to credit for reinsurance to that of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank).
- Conform California insurance law to NAIC Reinsurance Model Law and specified Model Regulations changes with some variation.
Reinsurance is insurance purchased by an insurer from another insurer for all or a portion of loss that may arise under one or more of the insurer's policies. Since reinsurance involves a transfer of liability company to company, it is often used by insurance companies as a risk management tool. Policyholders are generally unaware of the reinsurance transaction and any direct action they may have on the policy remains with the original insurer.
The NAIC's recently amended reinsurance Models reflect efforts by the states to modernize reinsurance regulation, including responding to Dodd-Frank changes. A key provision of the NAIC changes relates to the certification of a non-admitted reinsurer. Under the revised NAIC Models, each state has the authority to certify a reinsurer or to recognize the certification issued by another NAIC-accredited state. As part of the certification process, a rating system provides for certified non-U.S.-based reinsurers to reduce collateral under specified conditions. The certification process is pivotal to permit a California domiciled ceding insurer to qualify for a credit on its financial statement under these new conditions. This bill amends current insurance law and adds new statutory language to reflect the NAIC Model changes with some variation, including but not limited to, an expanded review time for some filings due to California's larger market and a cost recovery provision.
The bill now heads to the Senate Appropriations Committee for consideration.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.