03/23/2004 01:35 PM Senate L&C

                        SB 357-INSURANCE                                                                                    
                                                                                                                                
CHAIR CON BUNDE announced SB 357 to be up for consideration.                                                                    
                                                                                                                                
SENATOR GARY STEVENS moved to adopt CSSB 357(L&C), version H.                                                                   
There were no objections and it was so ordered.                                                                                 
                                                                                                                                
MS. LINDA HALL, Director, Division of Insurance, Department of                                                                  
Community & Economic Development (DCED), said the CS has two                                                                    
changes.                                                                                                                        
                                                                                                                                
     We have  had two areas  of concern expressed  to us....                                                                    
     One  of those  is represented  in sections  47 and  48,                                                                    
     which are  the changes in  the bill. The  original bill                                                                    
     requires  reinsurance   agreements  to  be   filed  and                                                                    
     approved by the director  of the Division of Insurance.                                                                    
     The feedback  we got from,  not only industry,  but the                                                                    
     Reinsurance  Association,  was  that  this  was  overly                                                                    
     burdensome  and could  sometimes be  impossible due  to                                                                    
     negotiations  between   insurers  for   their  treating                                                                    
     reinsurance  agreements. The  new  language  in the  CS                                                                    
     requires  only  that  the signed  agreements  be  filed                                                                    
     within  30 days  and it's  my understanding  that these                                                                    
     changes  meet the  concerns of  industry and  they also                                                                    
     meet our needs. Our needs were  that we need to be sure                                                                    
     that  we  are   able  to  get  copies   of  the  signed                                                                    
     reinsurance agreements  and that had been  a problem in                                                                    
     the  past. So,  the  only  changes in  the  CS are  to,                                                                    
     instead  of   the  division   having  to   approve  the                                                                    
     reinsurance agreements, they would  merely have to file                                                                    
     a signed copy of the reinsurance agreements.                                                                               
                                                                                                                                
     The  other  area  of  concern  that  I  would  like  to                                                                    
     address...is in  section 12 of  the bill and  I believe                                                                    
     this was  also part  of a letter  that was  received by                                                                    
     members of the committee.                                                                                                  
                                                                                                                                
CHAIR BUNDE asked her if she was referencing the Timber                                                                         
Insurance Exchange letter.                                                                                                      
                                                                                                                                
MS. HALL replied yes. She explained:                                                                                            
                                                                                                                                
     The second half  of that letter is addressed  in 47 and                                                                    
     48 addressed  in the CS.  Section 12 has  received some                                                                    
     concern. The  language in section 12  is taken directly                                                                    
     from  the  NAIC   [National  Association  of  Insurance                                                                    
     Commissioners] model  regulations on  reinsurance. What                                                                    
     we've tried  to do here  is to provide  assurances that                                                                    
     the  state  of  domicile  is  aware  that  the  insurer                                                                    
     writing  the reinsurance  is a  life insurance  company                                                                    
     who is  writing what  is typically a  property casualty                                                                    
     line   of   workers'    compensation.   The   financial                                                                    
     statements  that   are  filed  by  the   two  types  of                                                                    
     companies  are   very  different   and  the   NAIC  has                                                                    
     recognized   a  need   for  more   extensive  financial                                                                    
     information  and  has  provided  a  supplement  to  the                                                                    
     annual financial  statements that a life  insurer would                                                                    
     file if they choose  to write workers' compensation. We                                                                    
     want  to  be  sure  that the  state  of  domicile,  the                                                                    
     primary  regulator,  has   that  information,  has  the                                                                    
     ability  to look  at and  approve that  company writing                                                                    
     those  lines of  business. We're  not asking  that they                                                                    
     have a  certificate of authority, but  merely that they                                                                    
     be given  approval, which  can be done  as simply  as a                                                                    
     letter acknowledging  that they have approval  to write                                                                    
     that  line  of  business.  That's  really  a  financial                                                                    
     oversight area.                                                                                                            
                                                                                                                                
CHAIR BUNDE added that the  letter expressed concern that section                                                               
12  would prevent  Alaskan property  and  casualty insurers  from                                                               
using life insurance as a reinsurance.                                                                                          
                                                                                                                                
MS. HALL clarified that it  wouldn't prevent them from using life                                                               
insurers  for  reinsurance  as  long   as  the  state  where  the                                                               
reinsurer is primarily regulated,  their state of domicile, knows                                                               
they're doing it and has approved  them doing it. They don't have                                                               
to be licensed,  so section 12 would not prevent  them from being                                                               
able to do it.                                                                                                                  
                                                                                                                                
CHAIR BUNDE  asked her  why it could  be perceived  as preventing                                                               
them from doing it.                                                                                                             
                                                                                                                                
MS. HALL replied that she didn't know.                                                                                          
                                                                                                                                
CHAIR BUNDE asked if she had any further comments on the bill.                                                                  
                                                                                                                                
MS. HALL  replied that she  had spent quite  a bit of  time going                                                               
through  the  bill   at  its  first  hearing   and  would  answer                                                               
questions.                                                                                                                      
                                                                                                                                
CHAIR BUNDE indicated there were no further questions.                                                                          
                                                                                                                                
SENATOR RALPH SEEKINS moved to  pass CSSB 357(L&C) from committee                                                               
with individual recommendations and attached zero fiscal note.                                                                  
                                                                                                                                
CHAIR BUNDE asked  for a roll call vote.  Senators Ralph Seekins,                                                               
Hollis French,  Bettye Davis,  Gary Stevens  and Chair  Con Bunde                                                               
voted yea; and CSSB 357(L&C) moved from committee.