Legislature(1993 - 1994)
03/15/1994 01:50 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
March 15, 1994
1:50 p.m.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator Steve Rieger, Vice-Chairman
Senator Bert Sharp
Senator Judy Salo
MEMBERS ABSENT
Senator Georgianna Lincoln
COMMITTEE CALENDAR
SENATE BILL NO. 266
"An Act extending the termination date of the Board of Certified
Direct-Entry Midwives; relating to the scope of practice of
certified direct-entry midwives; and providing for an effective
date."
SENATE BILL NO. 213
"An Act extending the Alaska Public Utilities Commission and the
regulatory cost charge."
SENATE BILL NO. 245
"An Act relating to investments of the permanent fund involving
equity interests in and debt obligations secured by mortgages on
real estate; and providing for an effective date."
SENATE BILL NO. 342
"An Act relating to risk based capital for insurers; and providing
for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 266 - See Labor & Commerce minutes dated 2/24/94.
SB 213 - See Labor & Commerce minutes dated 9/28/93, 2/8/94,
2/24/94, 3/10/94.
SB 245 - See State Affairs minutes dated 1/28/94 and
2/4/94.
SB 342 - No previous action to record.
WITNESS REGISTER
Josh Fink, Committee Aide
Senate Labor & Commerce Committee
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on SB 266, SB 213
and SB 245
Bob Lohr, Executive Director
Alaska Public Utilities Commission
1016 W. 6th, Suite 400
Anchorage, AK 99501-1963
POSITION STATEMENT: Supports CSSB 213(L&C)
Bill Scott, Executive Director
Alaska Permanent Fund Corporation
P.O. Box 25500
Juneau, AK 99802-0500
POSITION STATEMENT: Present to respond to questions on
SB 245
David Walsh, Director
Division of Insurance
Barbara Thurston, Chief Actuary
Division of Insurance
Katy Campbell, Assistant Actuary
Division of Insurance
Department of Commerce & Economic Development
P.O. Box 110805
Juneau, AK 99811-0805
POSITION STATEMENT: Offered information on SB 342
ACTION NARRATIVE
TAPE 94-16, SIDE A
Number 001
CHAIRMAN TIM KELLY called the Senate Labor and Commerce Committee
meeting to order at 1:50 p.m. He brought SB 266 (DIRECT-ENTRY
MIDWIVES/BD & PRACTICES) before the committee and directed
attention to a proposed Labor & Commerce committee substitute.
JOSH FINK, committee aide, explained the committee substitute is a
simple extension of the Board of Certified Direct-Entry Midwives.
It deletes a section contained in the original bill that allowed
them to adopt regulations on their scope of practice.
Mr. Fink pointed out there was a new Labor and Commerce zero fiscal
note. The fiscal note on the original bill was $5,000 for the
promulgation of regulations.
Number 025
SENATOR RIEGER moved the adoption of CSSB 266(L&C). Hearing no
objection, the motion carried.
SENATOR RIEGER moved that CSSB 266(L&C) be passed out of committee
with individual recommendations. Hearing no objection, it was so
ordered.
Number 050
CHAIRMAN KELLY brought SB 213 (APUC EXTENSION AND REGULATORY COST
CHARGE) before the committee as the next order of business and
directed attention to a proposed Labor & Commerce committee
substitute.
JOSH FINK, committee aide, said the committee substitute deletes
Section 1 of the original bill that deal with the reclassifying of
section heads. Also, a broader cost of power definition has been
inserted in the committee substitute. He explained that with a
narrow definition of "cost of power" RCC rates will increase 35
percent, and with a broader definition of "cost of power" RCC rates
and other utilities rates will increase 28.8 percent.
Number 085
CHAIRMAN KELLY asked if his understanding was correct that the RCC
changes are essentially revenue neutral; that they are just being
shifted around to the utilities and trying to readjust the rates
depending on how much time the APUC is spending on each of these
utilities.
BOB LOHR, Executive Director, Alaska Public Utilities Commission,
testifying from Anchorage, acknowledged that his understanding was
correct. A decease in the electric rates, such as the
approximately $600,000, would be shifted to either other regulated
utilities or pipeline carrier. The net result to the Commission
would be the same.
Number 100
SENATOR SHARP moved that CSSB 213(L&C), version "R," be adopted.
Hearing no objection, the motion carried.
SENATOR SHARP moved that CSSB 213(L&C) be passed out of committee
with individual recommendations. Hearing no objection, it was so
ordered.
Number 110
CHAIRMAN KELLY introduced SB 245 (PERMANENT FUND INVESTMENTS IN
REAL ESTATE) as the next order of business and directed attention
to a proposed Labor & Commerce committee substitute.
JOSH FINK, committee aide, explained the Labor & Commerce committee
substitute makes two changes to the State Affairs committee
substitute. It raises the cap from $50 million to $100 million on
real estate properties with which the permanent fund may invest 100
percent. In addition, while common law currently dictates that the
trustees of the permanent fund are fiduciaries, it is not in
statute, and the committee substitute provides in statute that they
are fiduciaries.
Number 118
It was noted that Bill Scott, Executive Director of the Alaska
Permanent Fund Corporation, was present to respond to questions.
There being no questions, CHAIRMAN KELLY asked for the pleasure of
the committee.
SENATOR RIEGER moved the adoption of CSSB 245(L&C). Hearing no
objection, the motion carried.
SENATOR RIEGER moved that CSSB 245(L&C) be passed out of committee
with individual recommendations. Hearing no objection, it was so
ordered.
Number 130
CHAIRMAN KELLY brought SB 342 (RISK BASED CAPITAL FOR INSURERS)
before the committee as the final order of business.
DAVID WALSH, Director, Division of Insurance, Department of
Commerce & Economic Development, introduced Barbara Thurston, Chief
Actuary, and Katy Campbell, Assistant Actuary, with a specialty in
life and health actuarial science.
Mr. Walsh explained the legislation represents the culmination of
many years of work by insurance regulators and industry
representatives from throughout the country.
The current statute does not take into account the difference in
sizes of companies, the difference in asset risk, the difference in
underwriting risk and type of business, etc. Regulators learned
during the 1980's in both the banking and insurance sectors that
that was simply not a good tool for regulation, nor did it
accurately reflect the strength that a company had. Banking
regulation went to risk based capital a few years ago, and with
insurance, part of it took a little longer to put together.
SB 342 sets up a series of criteria based upon a company's size,
how they invest their money, the type of risk that they underwrite,
which is then put into a mathematical formula. From that formula,
a number is achieved, and based upon the number, the regulator
either does or doesn't take action.
At 200 percent of the minimum capital necessary, there are
permissive things that a regulator may do. At 150 percent there
are some things that a regulator has to do, like sit down with a
company and work out a plan for rehabilitation. At 100 percent of
risk based capital that means they are into the very dollars that
provide the company with life and there are some mandatory
regulatory actions there.
Mr. Walsh said the Alaskan domestic companies benefit from this
change. The average nationwide for healthy companies is about 280
to 290 percent of risk based capital. Alaskan companies range from
400 percent of risk based capital to 24,000 percent of risk based
capital. He said this points out that our companies are
conservative companies that are well managed. Risk based capital
will allow them to provide a little more flexibility in their
investment policy based upon that strength. The statutes, as they
currently exist, don't allow that flexibility.
Mr. Walsh said the state's domestic companies are all in favor of
the proposed legislation, however, one change has been suggested
Alaska National. The risk based capital formula is a national
formula that will be changed and adapted as the industry changes
and the market changes. The amendment proposed would require a
public hearing process in Alaska to make certain that that change
is good for Alaskan consumers and Alaskan domestic companies. He
also spoke to other minor amendments being proposed by the Division
of Insurance.
Number 260
SENATOR SHARP moved that the amendments proposed by the Division of
Insurance be adopted and incorporated into a Labor & Commerce
committee substitute. Hearing no objection, the Chairman stated
CSSB 342(L&C) was adopted.
Number 265
SENATOR RIEGER asked what the phrase "monetary consideration
received under an annuity" refers to. KATY CAMPBELL answered it
relates to any kind of single premium payments to purchase a
deferred annuity.
SENATOR SHARP moved that CCSB 342(L&C) be passed out of committee
with individual recommendations. Hearing no objection, it was so
ordered.
There being no further business to come before the committee, the
meeting was adjourned at 2:08 p.m.
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