Legislature(2007 - 2008)
04/04/2007 03:05 PM House L&C
| Audio | Topic |
|---|---|
| Start | |
| HB170 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 4, 2007
3:05 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Jay Ramras
Representative Robert L. "Bob" Buch
Representative Berta Gardner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 170
"An Act relating to annual audit reports by insurers, to
custodians of insurer assets, to writing workers' compensation
insurance by surplus lines insurers, to reports by surplus lines
insurers, to the definition of 'wet marine and transportation
insurance,' to false or misleading financial statements
concerning insurance audits, and to the membership of the Alaska
Life and Health Insurance Guaranty Association; and providing
for an effective date."
- MOVED HB 170 OUT OF COMMITTEE
HOUSE BILL NO. 65
"An Act relating to breaches of security involving personal
information, credit report and credit score security freezes,
consumer credit monitoring, credit accuracy, protection of
social security numbers, care of records, disposal of records,
identity theft, furnishing consumer credit header information,
credit cards, and debit cards, and to the jurisdiction of the
office of administrative hearings; amending Rule 60, Alaska
Rules of Civil Procedure; and providing for an effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HB 170
SHORT TITLE: INSURANCE
SPONSOR(s): LABOR & COMMERCE BY REQUEST
03/01/07 (H) READ THE FIRST TIME - REFERRALS
03/01/07 (H) L&C, FIN
03/23/07 (H) L&C AT 3:00 PM CAPITOL 17
03/23/07 (H) Heard & Held
03/23/07 (H) MINUTE(L&C)
04/04/07 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
LINDA HALL, Director
Division of Insurance
Department of Community & Economic Development
Juneau, Alaska
POSITION STATEMENT: Presented HB 170.
MAX MERTZ, Certified Public Accountant (CPA);
Partner
Elgee Rehfeld Mertz, LLC
Juneau, Alaska
POSITION STATEMENT: Testified during hearing on HB 170.
JOHN GEORGE, representing
The American Council of Life Insurance
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 170.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:05:32 PM. Representatives
Gardner, Gatto, Neuman, Buch, and Olson were present at the call
to order. Representatives Ramras and LeDoux arrived as the
meeting was in progress.
HB 170-INSURANCE
3:06:00 PM
CHAIR OLSON announced that the only order of business would be
HOUSE BILL NO. 170, "An Act relating to annual audit reports by
insurers, to custodians of insurer assets, to writing workers'
compensation insurance by surplus lines insurers, to reports by
surplus lines insurers, to the definition of 'wet marine and
transportation insurance,' to false or misleading financial
statements concerning insurance audits, and to the membership of
the Alaska Life and Health Insurance Guaranty Association; and
providing for an effective date."
3:06:11 PM
LINDA HALL, Director, Division of Insurance ("The Division"),
Department of Commerce, Community, & Economic Development
(DCCED), explained that several of the domestic insurance
companies that are regulated by the Division had concerns with
HB 170. After meeting to discuss these concerns, both the
Division and the companies in question are in agreement. The
requirements contained in the bill are not new requirements, as
was previously discussed. These companies have suggested
language changes that Ms. Hall has agreed to consider. She
stated that she does not want the requirements to be more
onerous than is needed for the companies regulated by the
Division. She is particularly interested in giving the Division
statutory authority to adopt the regulations needed to maintain
accreditation. She opined that this is important to both the
insurance companies and consumers.
CHAIR OLSON stated that he has been contacted by several of the
insurance companies, adding that the companies are appreciative
that Ms. Hall is working with them to address concerns. He
commented that this is a work in progress, and that more work is
likely to be done before the bill is heard in the House Finance
Committee.
3:08:02 PM
REPRESENTATIVE NEUMAN commented on the good work done by Ms.
Hall.
3:08:12 PM
REPRESENTATIVE BUCH inquired as to whether the statutory
requirement is a "housekeeping requirement."
MS. HALL replied no. She explained that there are provisions in
current statute that require the insurers to follow the audit
instructions on the annual statement. These instructions will
no longer be in statute as of 2009. The Division has added
minimum statutory language which gives the authority to adopt
the National Association of Insurance Commissioners (NAIC) model
regulations. These regulations reiterate the current
requirements. She pointed out that there are 2 requirements
that are not currently accreditation standards, but are in the
process. This includes a requirement for an audit committee,
and a management report of internal controls. She explained
that the regulations to be adopted include standards for
independent directors, along with requirements for insurance
companies that meet certain thresholds. She explained that
depending on which threshold is exceeded, there are a certain
amount of outside directors. There are no companies in Alaska
that meet these thresholds, and only 179 companies meet them
nationwide.
3:10:46 PM
REPRESENTATIVE GATTO, referring to the word "require" on Page 2,
line 14, asked whether an "order" is different than a
"directive."
MS. HALL replied that "directive" does not have a statutory
definition. The Division typically issues an order, and the
process for this is defined in statute. In regard to the word
"require", she explained that there may be circumstances related
to insolvency or increased risk of financial impairment, which
would then require an internal control report from management.
The Division is working with the industry to change the language
in Section 2(i), because "for good cause" is not defined.
3:12:38 PM
MAX MERTZ, Certified Public Accountant (CPA); Partner, Elgee
Rehfeld Mertz, LLC, stated that he has been working as a CPA
since 1989, and in Alaska since 1992. He noted that he is also
the chair of the Board of Public Accountancy ("the Board"),
although he is not speaking on behalf of the Board. He has
discussed this issue with the Alaska Society of Certified Public
Accountants (ASCPA), which shares his views. He expressed
concern with the language in Section 1, which requires the
registration of CPA firms. He shared his belief that this
section should be deleted, as the Board regulates both CPAs and
CPA firms in Alaska. He explained that CPAs must be licensed,
and are subject to the Accountancy Act in Alaska Associated
Regulations. Additionally, CPAs must maintain good standing,
and conform to the standards of the profession as contained in
the American Institute of Certified Public Accountants (AICPA)
code of professional ethics. Certified public accountants must
also undergo a regular peer review, and maintain a system of
quality controls. He stated that a CPA must maintain a level of
competence in any industry that he or she audits, including the
insurance industry. He shared his belief that the existing
regulatory infrastructure for CPAs is sufficient to ensure
adequate protection of the public, and an additional tier of
regulation is not needed. He stated that for the past two
years, the AICPA and the NAIC have been working on model rules
that are to go into effect in 2010. These stipulate
qualifications for CPAs performing the audits of insurers. He
shared his belief that the language should be changed to allow
for the adoption of these model rules once they are completed.
CHAIR OLSON asked whether these concerns were shared with Ms.
Hall prior to today's meeting.
MR. MERTZ replied no, and said that this issue was not brought
to his attention until the previous day.
CHAIR OLSON shared his understanding that HB 170 contains NAIC
model language.
3:16:05 PM
JOHN L. GEORGE, representing the American Council of Life
Insurers (ACLI), stated that the ACLI is in support of HB 170.
The ACLI believes that this adds credibility to the solvency of
the insurance industry.
CHAIR OLSON noted that Mr. George served as director of the
Division for many years.
3:16:49 PM
MS. HALL, in regard to Mr. Mertz's concerns, said that this is
not the first time this concern has been raised. She explained
that the term "register" is currently used in the annual
statement instructions. This is where all the audit standards
are referenced, and this is not a new requirement. She said
that the intent behind the enabling language is to adopt the
model NAIC rule. She said that while there may be a number of
requirements for CPA firms that perform audits, the Division
does not have any statutory authority or oversight of CPAs. She
stated that statutory requirements are needed in order to take
action against or remove a CPA firm.
3:18:17 PM
REPRESENTATIVE RAMRAS stated that he appreciates the work done
by the Division.
CHAIR OLSON closed public testimony.
3:18:48 PM
REPRESENTATIVE NEUMAN moved to report HB 170 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 170 was reported from the
House Labor and Commerce Standing Committee.
3:19:21 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
3:19 PM.
| Document Name | Date/Time | Subjects |
|---|