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AB-2996 California FAIR Plan Association.(2023-2024)

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Date Published: 08/24/2024 04:00 AM
AB2996:v96#DOCUMENT

Amended  IN  Senate  August 23, 2024
Amended  IN  Senate  June 20, 2024
Amended  IN  Assembly  March 21, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill
No. 2996

Introduced by Assembly Member Alvarez

February 16, 2024

An act to add Section 63087.5 to, and to add Article 11 (commencing with Section 63049.75) to Chapter 2 of Division 1 of Title 6.7 of, the Government Code, and to add Section 10100.3 to the Insurance Code, relating to insurance, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


AB 2996, as amended, Alvarez. California FAIR Plan Association.
The California FAIR Plan Association is a joint reinsurance association in which all insurers licensed to write basic property insurance participate in administering a program for the equitable apportionment of basic property insurance for persons who are unable to obtain that coverage through normal channels. Existing law requires the association’s plan of operation and any amendment to the plan to be approved by the Insurance Commissioner. Existing law establishes the California Infrastructure and Economic Development Bank and authorizes it to issue bonds to provide funds for the payment of costs of a project for a participating party or upon request by a state entity.
This bill would authorize the association association, if granted prior approval from the commissioner, to request the California Infrastructure and Economic Development Bank to issue bonds, and would authorize the bank to issue those bonds to finance the costs of claims, to increase liquidity and claims-paying capacity of the association, and to refund bonds previously issued for that purpose. The bill would specify that the association is a participating party and that financing all or any portion of the costs of claims or to increase liquidity and the claims-paying capacity of the association is a project for bond purposes. The bill would authorize the bank to loan the proceeds of issued bonds to the association, and would authorize the association to enter into a loan agreement with the bank and to enter into a line of credit agreement with an institutional lender or broker-dealer.
This bill would require the association, with the if the above-described bonds, loan agreements, or lines of credit received the prior approval of the commissioner, to assess all members to pay all loan payments and the costs and expenses relating to a loan agreement with the bank, as well as to assess all members to repay a line of credit and its related costs and expenses. members in the amounts and at the times necessary to timely pay in full all obligations of the association with respect to those bonds, loan agreements, or lines of credit and related agreements, as specified.
Existing law establishes the California Infrastructure and Economic Development Bank Fund, a continuously appropriated fund, for the purpose of implementing the objectives of the bank.
To the extent that the bill would result in additional revenues being deposited into the California Infrastructure and Economic Development Bank Fund, the bill would make an appropriation.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Article 11 (commencing with Section 63049.75) is added to Chapter 2 of Division 1 of Title 6.7 of the Government Code, to read:
Article  11. California FAIR Plan Association Financing

63049.75.
 (a) Notwithstanding any other provision of this division, pursuant to Section 10100.3 of the Insurance Code and upon approval of the bank, a financing of the costs of paid claims or to increase liquidity and claims-paying capacity upon the request of the California FAIR Plan Association shall be deemed to be in the public interest and eligible for financing by the bank. Article 3 (commencing with Section 63040), Article 4 (commencing with Section 63042), Article 5 (commencing with Section 63043), Article 5.5 (commencing with Section 63047.1), Article 6 (commencing with Section 63048), Article 6.3 (commencing with Section 63048.55), Article 6.5 (commencing with Section 63048.6), Article 6.7 (commencing with Section 63048.91), Article 7 (commencing with Section 63049), Article 8 (commencing with Section 63049.6), Article 9 (commencing with Section 63049.67), and Article 10 (commencing with Section 63049.70) shall not apply to that financing provided by the bank.
(b) Notwithstanding any other provision of this division, the bank shall not have authority over any matter that is subject to the approval of of, or otherwise regulated by, the Insurance Commissioner under Chapter 9 (commencing with Section 10090) of Part 1 (commencing with Section 1880) of Division 2 of the Insurance Code. The bank shall have the right to enforce all obligations of the California FAIR Plan Association under the agreements relating to bonds issued under this section.
(c) The bank may issue taxable or tax-exempt bonds pursuant to Chapter 5 (commencing with Section 63070) to finance the costs of claims or to increase liquidity and claims-paying capacity of the California FAIR Plan Association, and to refund bonds previously issued for that purpose, and may loan the proceeds thereof to the California FAIR Plan Association. Bond proceeds may also be used to fund necessary reserves, capitalized interest, credit or liquidity enhancement costs, and costs of issuance.
(d) Bonds issued under this section shall not be deemed to constitute a debt or liability of the state or of any political subdivision thereof, other than the bank, or a pledge of the faith and credit of the state or of any political subdivision, but shall be payable solely from the fund and other revenues and assets securing the bonds. All bonds issued under this article shall contain on the face of the bonds a statement to that effect.

SEC. 2.

 Section 63087.5 is added to the Government Code, immediately following Section 63087, to read:

63087.5.
 For purposes of this chapter:
(a) “Participating party” includes the California FAIR Plan Association.
(b) “Project” has the same meaning as defined in Section 63010, and also includes financing all or any portion of the costs of claims or to increase liquidity and the claims-paying capacity of the California FAIR Plan Association in an amount, together with necessary reserves, capitalized interest, credit or liquidity enhancement costs costs, or costs of issuance, that may be determined by the California FAIR Plan Association Association, with prior approval from the Insurance Commissioner, in a request to the bank made pursuant to Section 63049.75.

SEC. 3.

 Section 10100.3 is added to the Insurance Code, to read:

10100.3.
 (a) The If granted prior approval from the commissioner, the association may do all of the following:
(1) Request the California Infrastructure and Economic Development Bank to issue bonds from time to time to finance all or any portion of the costs of claims or to increase liquidity and claims-paying capacity, pursuant to Section 63049.75 of the Government Code.
(2) Enter into loan agreements with the California Infrastructure and Economic Development Bank, pursuant to Section 63049.75 of the Government Code.
(3) Enter into line of credit agreements with one or more institutional lenders, as defined in Section 22600 of the Financial Code, or one or more broker-dealers, as defined in Section 25004 of the Corporations Code, for the purpose of financing the costs of claims or to increase liquidity and claims paying claims-paying capacity and to refund lines of credit previously incurred for that purpose.
(4) Secure those loan agreements or line of credit agreements by a pledge of, and the grant of a lien and security interest in, collateral, including premiums, revenues, and receivables. That pledge, lien, and security interest is subject to Division 9 (commencing with Section 9101) of the Commercial Code.
(5) Enter into any other agreement or take any other action necessary or convenient to the execution and delivery of loan agreements bonds, loan agreements, or line of credit agreements.

(b)The association shall, with the approval of the commissioner, assess all members to repay all obligations with respect to a loan agreement entered into pursuant to paragraph (2) of subdivision (a) and the costs and expenses with respect to that loan agreement.

(c)The association shall, with the approval of the commissioner, assess all members to repay all obligations with respect to a line of credit entered into pursuant to paragraph (3) of subdivision (a) and the costs and expenses with respect to that line of credit.

(b) If the bonds, loan agreements, or lines of credit described in subdivision (a) have received the prior approval of the commissioner as provided in subdivision (a), the association shall assess members in the amounts and at the times necessary to timely pay in full all obligations of the association with respect to those bonds, loan agreements, and lines of credit and all obligations of the association under agreements entered into pursuant to paragraph (5) of subdivision (a). Once approved by the commissioner, specific repayment terms, including those relating to assessment, shall not be altered by subsequent amendment to the plan of operation, and amendments to the plan of operation shall not impair the timely payment in full of any obligations of the association with respect to those bonds, loan agreements, and lines of credit and all obligations of the association under agreements entered into pursuant to paragraph (5) of subdivision (a).

SEC. 4.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
California is now experiencing a severe property insurance availability crisis in the state. This crisis in availability within the property insurance market normally provided by admitted insurers and licensed surplus line brokers is having the result that needed coverage is often unavailable in the normal insurance market, forcing consumers to resort to the “nonadmitted” or “secondary market,” which are insurance alternatives not overseen by the Department of Insurance. Consumers are also having to purchase much more insurance through the California FAIR Plan Association, and the association has grown to such an extent that its financial capacity to pay claims after a catastrophic fire is unlikely.
The Legislature finds that access to basic property insurance suitable for protection of all types of habitational risk, including personal and commercial lines of insurance, has become increasingly unavailable and that, as a result, all Californians may suffer because of this unavailability. In order for insurance consumers to obtain adequate policy coverage from the California FAIR Plan, which is subject to regulation by the commissioner, as soon as possible, it is necessary that this act take effect immediately.