Legislature(1993 - 1994)
03/15/1994 01:50 PM Senate L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.