Legislature(1993 - 1994)

03/15/1994 01:50 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
              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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