03/19/2021 01:30 PM Senate LABOR & COMMERCE

                   SB 87-REINSURANCE; CREDITS                                                                               
                                                                                                                                
1:50:53 PM                                                                                                                    
CHAIR  COSTELLO announced  the consideration  of  SENATE BILL  NO.                                                              
87,  "An Act  relating to  credit for  reinsurance; and  providing                                                              
for an effective date."                                                                                                         
                                                                                                                                
She advised  that the purpose  of the second  hearing of SB  87 is                                                              
to have  Lori Wing-Heier, Director  of the Division  of Insurance,                                                              
go  over  the  questions  members asked  when  she  visited  their                                                              
offices after  the first hearing  and the answers she  provided in                                                              
writing.                                                                                                                        
                                                                                                                                
1:51:52 PM                                                                                                                    
LORI WING-HEIER,  Director, Division  of Insurance,  Department of                                                              
Commerce,   Community,   and  Economic   Development,   Anchorage,                                                              
Alaska,  stated that  the two  questions that  arose from  meeting                                                              
with committee members were:                                                                                                    
                                                                                                                                
     1) Q.  Does the Division  of Insurance monitor  both the                                                                   
     original  company that  insures a home  and the  company                                                                   
     that  covers  the  reinsurance  to  be  sure  there  are                                                                   
     sufficient funds to cover the insured property?                                                                            
     A. Yes, the division monitors both.                                                                                        
     2. Q. Are there any organizations opposed to SB 87?                                                                        
     A. No, the division is not aware of any opposition to                                                                      
     SB 87.                                                                                                                     
                                                                                                                                
CHAIR COSTELLO  asked her to give  a brief recap of what  the bill                                                              
does and what other states are doing in this area.                                                                              
                                                                                                                                
MS.  WING-HEIER stated  that all  states eventually  will adopt  a                                                              
bill similar  to SB  87. She  said the  Federal Insurance  Office,                                                              
which came  out of the Dodd-Frank  Act, entered into  an agreement                                                              
with  the European  Union and  the United  Kingdom about  solvency                                                              
standards   for   insurance   companies.   Because   the   federal                                                              
government  is  not the  regulator  of  insurance, each  state  is                                                              
required  to   adopt  legislation   similar  to  this   bill.  The                                                              
timeframe  for adopting  the legislation  is five  years and  will                                                              
expire in September 2022.                                                                                                       
                                                                                                                                
MS.  WING-HEIER related  that  insurance  companies typically  buy                                                              
reinsurance behind  policies they sell consumers.  This limits the                                                              
primary  insurer's  loss  in  the  event of  a  large  claim.  For                                                              
example, for a  $1 million home, the primary  insurer may reinsure                                                              
half  that amount.  As the  regulator, the  Division of  Insurance                                                              
will look  to see that  the insurance company  is carrying  the $1                                                              
million on their  balance sheet and has adequate  capital to cover                                                              
the full  $1 million.  The insurance company  is asking  to reduce                                                              
the  credit by  $500,000 if  they buy  reinsurance. The  agreement                                                              
authorizes that  provided the US,  the European Union, and  the UK                                                              
all have agreed to the same solvency metrics.                                                                                   
                                                                                                                                
1:54:52 PM                                                                                                                    
CHAIR COSTELLO  opened public  testimony on  SB 87; finding  none,                                                              
she closed  public testimony  on SB 87  and solicited the  will of                                                              
the committee.                                                                                                                  
                                                                                                                                
1:55:19 PM                                                                                                                    
SENATOR HOLLAND  moved to  report SB  87, work order  32-GS1584\A,                                                              
from  committee  with  individual   recommendations  and  attached                                                              
fiscal note(s).                                                                                                                 
                                                                                                                                
1:55:37 PM                                                                                                                    
CHAIR  COSTELLO found  no  objection  and SB  87  passed from  the                                                              
Senate Labor and Commerce Standing Committee.