Legislature(2019 - 2020)BUTROVICH 205

05/09/2019 09:00 AM RULES

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

Audio Topic
09:03:48 AM Start
09:04:16 AM HB78
09:29:24 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SCS HB 78(RLS) Out of Committee
-- Public Testimony --
          HB  78-INSURER & GROUP INSURANCE DISCLOSURE                                                                       
9:04:16 AM                                                                                                                    
CHAIR COGHILL announced  the consideration of HOUSE  BILL NO. 78,                                                               
"An  Act   relating  to  insurance;  relating   to  an  insurer's                                                               
corporate  annual  disclosure;   relating  to  insurance  company                                                               
holding systems; and providing for an effective date."                                                                          
He noted  who was available  to answer questions and  solicited a                                                               
motion to adopt the proposed committee substitute.                                                                              
9:05:13 AM                                                                                                                    
SENATOR  GIESSEL moved  to adopt  the  proposed Senate  committee                                                               
substitute  (SCS) for  HB 78(RLS),  [work order  31-GH1953\M], as                                                               
the working document.                                                                                                           
CHAIR  COGHILL stated  that  without objection,  the  CS was  the                                                               
working document before the committee.                                                                                          
SENATOR  GIESSEL clarified  her motion  to adopt  work order  31-                                                               
9:06:22 AM                                                                                                                    
RYNNIEVA  MOSS,   Staff,  Senator  John  Coghill,   Alaska  State                                                               
Legislature,  Juneau,  explained  that  most of  the  changes  in                                                               
version  M were  made to  conform  to the  Manual of  Legislative                                                               
Drafting.  Legislative  Legal  Services also  added  an  indirect                                                               
court rule amendment  in Section 7 to reflect  court rule changes                                                               
in  Section   3  and  Section   5.  The  phrase   "agreements  or                                                               
documentation  may not  serve as  evidence in  a proceeding,"  on                                                               
page 11,  line 27,  changes a  court rule  and subsection  (f) on                                                               
page 13, lines  16-22, also changes a court rule.  Section 8 is a                                                               
new section  that adds  a conditional effect  that Section  3 and                                                               
Section  5 will  only be  enacted if  the court  rule changes  in                                                               
those sections are enacted by  a two-thirds majority vote of each                                                               
CHAIR COGHILL  asked Ms. Wing-Heier  to offer her  perspective of                                                               
the committee substitute.                                                                                                       
9:08:40 AM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce,  Community and  Economic  Development (DCCED),  Juneau,                                                               
described HB 78 as an  accreditation bill. She explained that the                                                               
division receives an accreditation  from the National Association                                                               
of  Insurance Commissioners,  which means  that Alaska  and other                                                               
jurisdictions have  adopted substantially similar  laws regarding                                                               
the  financial solvency  of an  insurance  company. For  example,                                                               
when an insurance company from  Pennsylvania comes to Alaska, the                                                               
director of  insurance knows that  company is being  examined and                                                               
held  to  the same  standards  as  Alaska National,  Umialik,  or                                                               
another   Alaska  insurance   company.  Conversely,   when  these                                                               
insurance  companies are  doing  business in  the  Lower 48,  the                                                               
commissioners or directors  in those states know  that the Alaska                                                               
companies have been examined and held to the same standards.                                                                    
MS.  WING-HEIER  said the  first  part  of  the bill  deals  with                                                               
corporate  governance.   She  explained  that  by   statute,  the                                                               
division examines  the financials  of an insurance  company every                                                               
three years,  but they  do not  receive the  corporate governance                                                               
documentation in the  off years, just during  the examination. HB
78  asks  insurance  companies   to  provide  the  division  with                                                               
corporate  governance documentation  every year.  This will  keep                                                               
the division  informed about  any material  change in  the board,                                                               
the  financial   solvency  of  the  company,   new  acquisitions,                                                               
mergers, or divestures,  and whether the board is  aware of these                                                               
9:10:55 AM                                                                                                                    
MS.  WING-HEIER said  the  second  part of  the  bill deals  with                                                               
group-wide  international holding  companies. She  explained that                                                               
with  changing economics  worldwide, places  like Asia  and Dubai                                                               
are entering the insurance market  and buying insurance companies                                                               
that transacts business  in the United States. The  bill says the                                                               
division can examine  any holding company that  is doing business                                                               
in Alaska if it is owned at the parent or holding company level.                                                                
She said  international companies  allow the division  to conduct                                                               
financial  examinations as  a tradeoff  for being  allowed to  do                                                               
business  here. She  said  she can't  imagine  that an  insurance                                                               
company  like Alaska  National or  Umialik would  be owned  by an                                                               
international  insurance company,  but  it could  happen. On  the                                                               
other hand,  there are internationally owned  insurance companies                                                               
not domiciled  here but doing  business in Alaska. The  bill lays                                                               
out who  would be the lead  supervisor of an examination  in this                                                               
circumstance.  The  division  would  always have  the  choice  of                                                               
participating  in an  examination but  it might  not be  the lead                                                               
supervisor.  She  said  she  finds  that  acceptable  unless  the                                                               
majority  of   the  premium  is   Alaskan  businesses.   In  that                                                               
circumstance, she said she would assert her right to lead.                                                                      
She said other than the court rules, that sums up the bill.                                                                     
9:12:56 AM                                                                                                                    
SENATOR  BEGICH  asked  her  to   explain  how  Alaska  would  be                                                               
protected  if  an international  or  non-NAIC  company was  doing                                                               
business in Alaska.                                                                                                             
MS. WING-HEIER  explained that if  an international  company from                                                               
Japan, for  instance, were  to take the  lead on  an examination,                                                               
the division would  find it acceptable to work  with that company                                                               
if they  trusted Japan to  use the  same standards. In  the other                                                               
circumstance the  division may be  working with a state  that has                                                               
chosen not to  seek NAIC accreditation. She cited  the example of                                                               
California  and  New York,  both  of  which have  many  insurance                                                               
companies that don't necessarily  seek NAIC accreditation. If the                                                               
division  was working  on an  examination and  it was  determined                                                               
that  the  majority  of  the  business  was  in  California,  the                                                               
division could  work with that  company if they  were technically                                                               
using the same standards.                                                                                                       
SENATOR BEGICH asked if HB 78 protects Alaska in that instance.                                                                 
MS. WING-HEIER said yes.                                                                                                        
9:14:38 AM                                                                                                                    
SENATOR BEGICH offered his understanding  that there are a series                                                               
of disclosures  so information could  not be subpoenaed  from the                                                               
division unless it is a federal or grand jury subpoena.                                                                         
MS. WING-HEIER said that's correct.  She noted that attorneys Dan                                                               
Wilkerson and  Erin Egan were  available to answer  any questions                                                               
about that.                                                                                                                     
SENATOR  BEGICH asked  if the  idea is  that it  doesn't prohibit                                                               
subpoenas being  issued to  other parties.  It just  protects the                                                               
division's control of confidential information.                                                                                 
MS.  WING-HEIER  that's  correct.  In the  event  of  a  lawsuit,                                                               
nothing  would  preclude  somebody  from going  directly  to  the                                                               
insurance  company  to  get  the  records.  It's  just  that  the                                                               
division would be unable to provide those records.                                                                              
SENATOR BEGICH  questioned the  need in  Section 5  for paragraph                                                               
(f)(1) on  page 13, line  1, of  the original bill.  He commented                                                               
that it's redundant because that's what the bill does.                                                                          
MS. WING-HEIER agreed that is what  the bill compels her to do as                                                               
the director.                                                                                                                   
SENATOR GIESSEL  advised that Sec.  21.22.117 relating  to Group-                                                               
wide supervision  of internationally  active insurance  groups is                                                               
now in Section 3 of the bill.                                                                                                   
9:17:45 AM                                                                                                                    
SENATOR  BEGICH read  paragraph (f)(1)  on  page 12,  line 6,  of                                                               
version M:                                                                                                                      
      (1) the director's cooperation is in compliance with                                                                      
     the laws of this state; and                                                                                                
He reiterated that it seems redundant.                                                                                          
MS. WING-HEIER said she didn't disagree.                                                                                        
CHAIR COGHILL asked Mr. Wilkerson to comment.                                                                                   
9:18:34 AM                                                                                                                    
DAN  WILKERSON,  Assistant   Attorney  General,  Civil  Division,                                                               
Commercial  and  Fair  Business   Division,  Department  of  Law,                                                               
Anchorage, said it  seems to clarify that the  Alaska director of                                                               
insurance  can  cooperate  with  a  regulatory  official  from  a                                                               
nonaccredited jurisdiction as  long as the Alaska  director is in                                                               
compliance with Alaska laws.                                                                                                    
SENATOR BEGICH said he understands that.                                                                                        
9:19:53 AM                                                                                                                    
CHAIR  COGHILL asked  Ms. Marks  to talk  about why  she added  a                                                               
section about a court rule amendment.                                                                                           
9:20:08 AM                                                                                                                    
MARIE MARX,  Attorney, Legislative  Legal Services,  Alaska State                                                               
Legislature, Juneau,  said it  was a  close call,  but provisions                                                               
[in Sections  3 and  5] change discovery  and evidence  rules and                                                               
create a testimonial  privilege. That has the  effect of changing                                                               
the  practice  and procedure  of  a  court  rule. If  this  isn't                                                               
specifically mentioned in  the bill and there is  a conflict, the                                                               
court rule will  override anything that is contrary  in the bill,                                                               
she  said.  The fact  that  the  provisions  are added  raises  a                                                               
legitimate  question and  it's easier  to  resolve the  potential                                                               
conflict now.                                                                                                                   
CHAIR  COGHILL   expressed  satisfaction  with  the   answer.  He                                                               
recognized that there was a conceptual amendment.                                                                               
9:22:27 AM                                                                                                                    
SENATOR  GIESSEL  moved  to adopt  Conceptual  Amendment  1  that                                                               
     The  director of  the Division  of Insurance  may adopt                                                                    
     regulations  necessary  to  implement the  most  recent                                                                    
     version of  the Financial Analysis Handbook  adopted by                                                                    
     the National Association of Insurance Commissioners.                                                                       
CHAIR COGHILL objected for an explanation.                                                                                      
MS. WING-HEIER explained that the  Division of Insurance receives                                                               
updated  manuals  from  the  National  Association  of  Insurance                                                               
Commissioners on an  annual basis and the division  was under the                                                               
impression that AS  21.06.140, which compels the  division to use                                                               
the current manuals, provided that  authority. However, it is the                                                               
opinion of Legislative Legal Services  that the division does not                                                               
have  that authority.  The proposed  conceptual amendment  allows                                                               
the  division  to  implement regulations  to  adopt  the  current                                                               
CHAIR COGHILL asked  Ms. Marx if she agreed  with the explanation                                                               
and that this would resolve the issue.                                                                                          
9:24:01 AM                                                                                                                    
MS.  MARX  agreed  that  the   legislature  needs  to  grant  the                                                               
department explicit  authority to  adopt future  amended versions                                                               
of  the  NAIC  manuals.  She suggested  that  the  new  statutory                                                               
provision  should  state that  by  the  authority granted  in  AS                                                               
44.62.245(a)(2),  the  Department   of  Commerce,  Community  and                                                               
Economic  Development  (DCCED)  may  incorporate  future  amended                                                               
versions  of the  Financial Analysis  Handbook  published by  the                                                               
National Association of Insurance Commissioners.                                                                                
SENATOR   GIESSEL  clarified   that   the  conceptual   amendment                                                               
encapsulates  the   concept  that   Ms.  Marx   articulated.  She                                                               
suggested including  a statement that Legislative  Legal Services                                                               
has the  authority to make  conforming changes. That  would allow                                                               
the drafters  to include  the reference  to the  specific statute                                                               
and language.                                                                                                                   
CHAIR COGHILL asked Ms. Marx  if she heard the language suggested                                                               
in the conceptual amendment.                                                                                                    
MS. MARX answered  no, but with authority from  the committee she                                                               
would be happy ensure the appropriate language is included.                                                                     
9:27:32 AM                                                                                                                    
SENATOR GIESSEL  clarified that the authority  to make conforming                                                               
changes comes from the chair of the committee.                                                                                  
9:27:44 AM                                                                                                                    
CHAIR COGHILL restated the language in the conceptual amendment:                                                                
     The  director   of  insurance  may   adopt  regulations                                                                    
     necessary to implement the most  recent versions of the                                                                    
     Financial  Analysis Handbook  adopted  by the  National                                                                    
     Association of Insurance Adjusters.                                                                                        
CHAIR COGHILL  withdrew his objection and  authorized Legislative                                                               
Legal Services to make necessary conforming changes.                                                                            
Without further objection, Conceptual Amendment 1 was adopted.                                                                  
9:28:33 AM                                                                                                                    
SENATOR GIESSEL  moved to report  SCS HB 78(RLS), work  order 31-                                                               
GH1953\M   as   amended,    from   committee   [with   individual                                                               
recommendations] and attached fiscal note(s).                                                                                   
CHAIR  COGHILL  stated that  without  objection,  SCS HB  78(RLS)                                                               
passed from  the Senate Rules  Standing Committee  with authority                                                               
for Legislative Legal Services to make conforming changes.                                                                      

Document Name Date/Time Subjects
HB 78 - Legal Memo Version M CS.pdf SRLS 5/9/2019 9:00:00 AM
HB 78
HB 78 - Sponsor Statement 3.4.19.pdf SRLS 5/9/2019 9:00:00 AM
HB 78
HB 78 - Fiscal Note DCCED-DOI 03.04.19.pdf SRLS 5/9/2019 9:00:00 AM
HB 78
HB 78 - Supporting Document-Support Letter from State Farm 3 28 19.docx.pdf SRLS 5/9/2019 9:00:00 AM
HB 78
HB 78 - Version A 3.4.19.pdf SRLS 5/9/2019 9:00:00 AM
HB 78
HB 78 - Version M Rules CS.pdf SRLS 5/9/2019 9:00:00 AM
HB 78