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AB-2167 Residential property insurance: high fire risk areas: study.(2019-2020)



Current Version: 08/20/20 - Amended Senate Compare Versions information image


AB2167:v94#DOCUMENT

Amended  IN  Senate  August 20, 2020
Amended  IN  Senate  August 05, 2020
Amended  IN  Senate  July 30, 2020
Amended  IN  Senate  July 23, 2020
Amended  IN  Assembly  May 04, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2167


Introduced by Assembly Members Daly and Cooley
(Principal coauthor: Senator Rubio)
(Coauthors: Assembly Members Chen, Megan Dahle, Kamlager, Mayes, Medina, and Waldron)
(Coauthors: Senators Dahle and Jones)

February 11, 2020


An act to add and repeal Chapter 12 (commencing with Section 10109) to of Part 1 of Division 2 of the Insurance Code, relating to insurance, and declaring the urgency thereof, to take effect immediately. insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 2167, as amended, Daly. Insurance market action plan. Residential property insurance: high fire risk areas: study.
The Insurance Rate Reduction and Reform Act of 1988, an initiative measure enacted by Proposition 103, as approved by the voters at the November 8, 1988, statewide general election, prohibits specified insurance rates from being approved or remaining in effect that are excessive, inadequate, unfairly discriminatory, or otherwise in violation of the act. The act requires an insurer that wishes to change a rate to file a complete rate application with the Insurance Commissioner, as specified.
This bill would require the commissioner to investigate, study, and prepare a report that addresses specific issues relating to ratemaking for residential property insurance policies in high fire risk areas. The bill would require the study to address the extent to which the commissioner may use its authority to create one or more market assistance plans to ensure that residential property insurance is fair, available, and affordable in high fire risk communities, the costs and benefits of authorizing insurers to include the cost of reinsurance as part of the rate for residential property insurance, and the extent to which the establishment of a public wildfire catastrophe model would be appropriate for use in residential property insurance ratemaking. The bill would require the commissioner, on or before July 1, 2022, to submit the report to the Chairpersons of the Assembly and Senate Committees on Insurance, the Speaker of the Assembly, the President pro Tempore of the Senate, and the Governor. The bill would repeal these provisions on January 1, 2025.

The Insurance Rate Reduction and Reform Act of 1988, an initiative measure enacted by Proposition 103, as approved by the voters at the November 8, 1988, statewide general election, prohibits specified insurance rates from being approved or remaining in effect that are excessive, inadequate, unfairly discriminatory, or otherwise in violation of the act. The act requires an insurer that wishes to change a rate to file a complete rate application with the Insurance Commissioner and deems the application approved 60 days after public notice of the application unless certain events occur, including that a consumer requests a hearing, or the commissioner determines to hold a hearing. The act requires hearings to be conducted pursuant to specified provisions of law governing administrative hearings. Existing law authorizes the provisions of Proposition 103 to be amended by a statute that furthers the purposes of the act and is enacted by the Legislature with a 23 vote.

This bill would establish the Insurance Market Action Plan (IMAP) program under which residential property insurance policies in a county may qualify for IMAP protection if the requirements of the program are met. The bill would require an IMAP filing submitted to the Department of Insurance by an insurer to include, among other things, a request for adequate rates, a plan for maintaining solvency of the insurer, and mitigation requirements. The bill would require a rate requested as part of an IMAP filing to be subject to the prior approval of the commissioner and in accordance with Proposition 103, except that the bill would require an insurer to receive an expedited review of its rate filing, not to exceed 120 days, if the insurer uses an actuarial assumption for trend and loss development that is at the midpoint or less of rate impacts, or files for a rate increase based solely on increased reinsurance costs, and does not otherwise change any other aspect of its rate filing from its previous department approved rate. The bill would require the Legislative Analyst’s Office, on or before June 30, 2024, to issue a report outlining the effectiveness of the IMAP program. Under the bill, the IMAP program would be inoperative on July 1, 2026, and would be repealed as of January 1, 2027.

By providing for an expedited review and approval of residential property insurance rates, the bill would amend Proposition 103 and thus require a 23 vote.

The bill would provide that its provisions are not severable.

The bill would make its operation contingent on the enactment of SB 292 of the 2019–20 Regular Session.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: TWO_THIRDSMAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Chapter 12 (commencing with Section 10109) is added to Part 1 of Division 2 of the Insurance Code, to read:
CHAPTER  12. High Fire Risk Areas

10109.
 (a) The commissioner shall investigate, study, and prepare a report that addresses all of the following:
(1) The extent to which the commissioner may use its authority to create one or more market assistance plans to ensure that residential property insurance is fair, available, and affordable in high fire risk communities in the state, including assessing the need for market assistance plans and how the commissioner may implement those market assistance plans.
(2) The costs and benefits of authorizing insurers to include the cost of reinsurance as part of the rate for residential property insurance, including an analysis of the impact that reinsurance costs, or a portion thereof, would have on residential property insurance, consumers, and the marketplace if permitted within an approved insurance rate. The report shall also analyze the extent to which it is possible to separate out the risk of wildfires in California from the overall reinsurance premium price that reinsurers charge to admitted insurers for reinsurance, and the extent to which it is possible to separate out the reinsurance costs paid by insurers for insuring homes in high fire risk areas.
(3) The extent to which the establishment of a public wildfire catastrophe model would be appropriate for use in residential property insurance ratemaking. The report shall include an analysis regarding the best methodology that will support the use of probabilistic catastrophe loss modeling, subject to, and consistent with, the requirements of Proposition 103, approved by the voters at the November 8, 1988, general election, preserving public access and peer review of the public wildfire catastrophe model, and providing a means for public education on high priority actions that may be taken to reduce wildfire risks.
(b) For each aspect of the investigation, study, and report required by subdivision (a), the commissioner shall ensure public participation and conduct proceedings in accordance with Section 1861.10.
(c) On or before July 1, 2022, the commissioner shall submit the report required by subdivision (a) to the Chairpersons of the Assembly and Senate Committees on Insurance, the Speaker of the Assembly, the President pro Tempore of the Senate, and the Governor.

10109.1.
 This chapter shall remain in effect only until January 1, 2025, and as of that date is repealed.