03/08/2021 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s) | |
| SB27 | |
| SB87 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 27 | TELECONFERENCED | |
| *+ | SB 87 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 8, 2021
1:29 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Roger Holland, Vice Chair
Senator Joshua Revak
Senator Gary Stevens
Senator Elvi Gray-Jackson
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
Board of Barbers & Hairdressers
Connie Dougherty - Anchorage
Tina Taylor - Soldotna
Khitsana Sypakanphay - Anchorage
- CONFIRMATIONS ADVANCED
SENATE BILL NO. 27
"An Act relating to industrial hemp; and providing for an
effective date."
- HEARD & HELD
SENATE BILL NO. 87
"An Act relating to credit for reinsurance; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 27
SHORT TITLE: INDUSTRIAL HEMP PROGRAM;MANUFACTURING
SPONSOR(s): SENATOR(s) HUGHES
01/22/21 (S) PREFILE RELEASED 1/8/21
01/22/21 (S) READ THE FIRST TIME - REFERRALS
01/22/21 (S) L&C, RES
03/08/21 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 87
SHORT TITLE: REINSURANCE; CREDITS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/22/21 (S) READ THE FIRST TIME - REFERRALS
02/22/21 (S) L&C
03/08/21 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
KHITSANA SYPAKANPHAY, Appointee
Board of Barbers & Hairdressers
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Barbers and Hairdressers.
CONNIE DOUGHERTY, Appointee
Board of Barbers and Hairdressers
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Barbers and Hairdressers.
TINA TAYLOR, Appointee
Board of Barbers and Hairdressers
Department of Commerce, Community and Economic Development
Soldotna, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Barbers and Hairdressers.
BUDDY WHITT, Staff
Senator Shelley Hughes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions and presented the
sectional analysis for SB 27 on behalf of the sponsor.
SENATOR SHELLEY HUGHES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 27.
ROB CARTER, Chief Agronomist
Division of Agriculture
Department of Natural Resources (DNR)
Palmer, Alaska
POSITION STATEMENT: Provided information and answered questions
related to SB 27.
SARA WILLIAMS, Founder
Hemp for Healthcare
Wasilla, Alaska
POSITION STATEMENT: Testified in support of 99 percent of SB 27.
DAVID SCHADE, Director
Division of Agriculture
Department of Natural Resources (DNR)
Eagle River, Alaska
POSITION STATEMENT: Provided supporting testimony on SB 27
LORI WING-HEIER, Director
Division of Insurance
Department of Commerce, Community, and Economic Development
Juneau, Alaska
POSITION STATEMENT: Introduced SB 87 on behalf of the
administration.
ACTION NARRATIVE
1:29:47 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:29 p.m. Present at the call to
order were Senators Stevens, Holland, and Chair Costello.
Senator Gray-Jackson arrived during introductions. Senator Revak
arrived as the meeting was in progress.
^Confirmation Hearing(s)
CONFIRMATION HEARING(S)
Board of Barbers and Hairdressers
1:31:16 PM
CHAIR COSTELLO announced the consideration of Governor
Appointees to the Board of Barbers and Hairdressers. She asked
each appointee to provide a brief background, their interest in
serving on the board, and any challenges the board may be facing
coming out of the COVID-19 pandemic and into recovery.
1:32:02 PM
KHITSANA SYPAKANPHAY, Appointee, Board of Barbers &
Hairdressers, Department of Commerce, Community and Economic
Development, Anchorage, Alaska, stated that she started her
career as a licensed hairdresser in 2004 and transitioned to
tattooing in 2018. This is parttime work and she works fulltime
with Alaska Airlines as a trainer, facilitator, and station
support.
CHAIR COSTELLO asked if she had attended any meetings since her
appointment in February 2021.
MS. SYPAKANPHAY answered no, but she had reviewed the minutes
from a previous meeting.
CHAIR COSTELLO asked if she experienced any challenges working
during the COVID-19 pandemic.
MS. SYPAKANPHAY replied she works by herself, and her clients
understand and follow the COVID procedures and processes.
CHAIR COSTELLO thanked her for serving.
1:34:49 PM
CHAIR COSTELLO, after discerning that no one wanted to testify,
opened and closed public testimony on the appointment of
Khitsana Sypakanphay to the Board of Barbers and Hairdressers.
CHAIR COSTELLO asked Connie Dougherty to provide a brief
background and her interest in serving on the board.
1:35:09 PM
CONNIE DOUGHERTY, Appointee, Board of Barbers and Hairdressers,
Department of Commerce, Community and Economic Development
(DCCED), Anchorage, Alaska, stated that she has been a
hairdresser in Anchorage since 1988. She spent many years as an
educator, teaching advanced techniques to other hairdressers and
apprentices. She became interested in serving last year when the
board implemented a number of changes that she did not support.
She said her hope is to get continuing education into the
guidelines for hairdressers, so everyone stays current.
CHAIR COSTELLO asked how many hairdressers, barbers, and
tattooist are licensed under this board.
MS. DOUGHERTY said her guestimate is about 14,000.
SENATOR HOLLAND asked what regulations motivated her to apply to
serve on the board.
MS. DOUGHERTY replied the one that got the attention of many
licensees was the removal of the practical examination prior to
licensure. The special license required for braiding also got a
lot of negative attention.
1:38:49 PM
CHAIR COSTELLO opened public testimony on the appointment of
Connie Dougherty to the Board of Barbers and Hairdressers;
finding none, she closed public testimony.
CHAIR COSTELLO asked Tina Taylor to introduce herself, provide a
brief background, and why she was interested in serving on the
Board of Barbers and Hairdressers.
1:39:07 PM
TINA TAYLOR, Appointee, Board of Barbers and Hairdressers,
Department of Commerce, Community and Economic Development,
Soldotna, Alaska, stated that she has 33 years in the industry
as a licensed cosmetologist, stylist, and manicurist. She has
also served her community as a Rotarian and school volunteer.
She said she was motivated to apply to serve when the board
eliminated the practical examination. She said she could be
helpful working on the regulations and representing her fellow
professionals.
SENATOR STEVENS congratulated her for being involved in Rotary
and serving her community.
SENATOR HOLLAND asked her to describe the practical exam.
MS. TAYLOR explained that applicants draw from a hat and must be
prepared to teach the aspect of the profession listed on the
paper they drew.
1:43:21 PM
CHAIR COSTELLO opened public testimony on the appointment of
Tina Taylor to the Board of Barbers and Hairdressers, and closed
it after determining that nobody wished to comment.
In accordance with AS 39.05.080, the Senate Labor and Commerce
Standing Committee reviewed the following and recommends the
appointments be forwarded to a joint session for consideration:
Board of Barbers & Hairdressers
Connie Dougherty - Anchorage
Tina Taylor - Soldotna
Khitsana Sypakanphay - Anchorage
Signing the reports regarding appointments to boards and
commissions in no way reflects individual members' approval or
disapproval of the appointees; the nominations are merely
forwarded to the full legislature for confirmation or rejection.
1:43:50 PM
At ease
SB 27-INDUSTRIAL HEMP PROGRAM; MANUFACTURING
1:46:55 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SENATE BILL NO. 27, "An Act relating to
industrial hemp; and providing for an effective date."
She noted that this was the first hearing, and the intention was
to hear invited testimony and hold the bill for further
consideration.
She noted the friendly amendment and asked for a motion.
1:47:24 PM
SENATOR HOLLAND moved Amendment 1, work order 32-LS0249\A.1, to
SB 27.
32-LS0249\A.1
Dunmire
3/4/21
AMENDMENT 1
OFFERED IN THE SENATE
TO: SB 27
Page 3, following line 8:
Insert a new bill section to read:
"* Sec. 2. AS 03.05.010(c) is amended to read:
(c) The commissioner of natural
resources may [SHALL] issue a stop order to any
person who is found to be producing a plant
product with delta-9-tetrahydrocannabinol over
0.3 percent, regardless of whether the person is
registered under AS 03.05.076. The commissioner
of natural resources shall notify the Marijuana
Control Board and the Department of Public Safety
when the commissioner issues a stop order."
Renumber the following bill sections accordingly.
Page 4, line 19:
Delete "Section 7"
Insert "Section 8"
Page 4, line 25:
Delete "sec. 8"
Insert "sec. 9"
Delete "sec. 7"
Insert "sec. 8"
Page 4, line 27:
Delete "sec. 8"
Insert "sec. 9"
CHAIR COSTELLO objected for discussion purposes.
SENATOR HOLLAND explained that the US Department of Agriculture
allows a 0.5 percent to 1.0 percent standard of negligence for
the levels of delta-9-tetrahydrocannabinol in plant products.
This amendment changes the term "shall" to "may" issue a stop
order to provide the commissioner of the Department of Natural
Resources (DNR) latitude in the seed stock that hemp growers are
allowed to purchase.
1:48:57 PM
CHAIR COSTELLO removed her objection to Amendment 1 to SB 27.
1:49:18 PM
SENATOR STEVENS objected to say he thought there was no
connection between marijuana and hemp, yet the amendment talks
about notifying the Marijuana Control Board.
1:49:29 PM
BUDDY WHITT, Staff, Senator Shelley Hughes, sponsor, Alaska
State Legislature, Juneau, Alaska, explained that hemp and
marijuana are both the same species but the small amount of THC
in hemp is not an intoxicant. The amendment gives the Division
of Agriculture the latitude to allow a hemp grower who is acting
in good faith the opportunity to recondition their crop if the
THC level tests above the allowed limit.
MR. WHITT advised that the existing language, which was added to
Senate Bill 6, is prohibitive. The department must issue a stop
order if the crop tests above the allowed limit and send their
name to the Marijuana Control Board and the Department of Public
Safety. The amendment allows the division more latitude in
managing the program. He said the sponsor believes this is a
middle ground on the path towards a long-lasting program. He
deferred further explanation to Rob Carter.
SENATOR STEVENS remarked that one would have to smoke a lot of
industrial hemp to have any affect.
SENATOR HOLLAND advised that hemp is used to make products such
as hemp-concrete and animal food stock. It has just a fraction
of the active ingredient found in marijuana.
1:52:14 PM
SENATOR SHELLEY HUGHES, Alaska State Legislature, Juneau,
Alaska, sponsor of SB 27, added that reconditioning a crop by
mixing seed with a level of THC that is above the limit with a
crop that has a lower level of THC allows a grower who is not a
bad actor the opportunity to remedy the situation.
1:52:54 PM
SENATOR STEVENS removed his objection.
CHAIR COSTELLO found no further objection and Amendment 1 to SB
27 was adopted. She asked the sponsor and staff to walk through
the amended bill.
1:53:18 PM
SENATOR HUGHES recounted the history of the bill. A federal farm
bill passed in 2014 that allowed states to start an industrial
hemp pilot program. Former Senator Johnny Ellis subsequently
introduced legislation to remove hemp from the criminal statutes
and identify it as a crop.
She related that late in the 2016 session one of her most
conservative constituents said he wanted to try industrial hemp
as food stock for his cattle. She committed to carry the bill
after Senator Ellis retired and the US Department of Agriculture
(USDA) established a path for states to have an industrial hemp
program that would comply with the law. In 2017, she filed
Senate Bill 6 and it passed in April 2018. In December 2018,
Congress passed the Hemp Farming Act as part of the 2018 Farm
Act, which removed industrial hemp from the Schedule I
Controlled Substance list. In 2019, the USDA released new
regulations that allowed states to continue their pilot programs
until October 2020. The USDA subsequently extended the date to
October 2021.
SENATOR HUGHES said that because of the federal changes since
2018, Alaska has to change its statutes. SB 27 is the response,
and it primarily removes the industrial hemp pilot program and
directs the Department of Natural Resources (DNR) to develop a
compliant program and submit it to the USDA for approval. The
bill also gives DNR the authority to permit the manufacture of
hemp products and to set up a registration and renewal process
to participate in the program. It also says that registrants
cannot have a controlled substance felony conviction in the last
10 years.
She shared that her preference would have been that growing
industrial hemp required no bureaucracy, but the extra framework
is necessary because of concerns at the federal level that the
plant looks like marijuana. Nevertheless, she said it is still
worth doing because hemp is a multibillion-dollar industry.
Canada is the second largest hemp producer in the world and
Alaska's climate is similar so this could help Alaska businesses
and the economy. She advocated for updating the statute and
opening the door for this opportunity.
1:59:06 PM
SENATOR GRAY-JACKSON asked if a hemp plant is the same as a
marijuana plant.
SENATOR HUGHES said Rob Carter can explain in detail, but hemp
has less THC and is not psychoactive.
SENATOR GRAY-JACKSON questioned whether they were the same
species.
SENATOR HUGHES suggested that Rob Carter could provide the
botanist's explanation.
CHAIR COSTELLO solicited the will of the committee to hear the
sectional analysis of SB 27 or a botanical analysis of the
difference between industrial hemp and recreational cannabis.
SENATOR STEVENS asked to hear from Rob Carter.
2:00:53 PM
ROB CARTER, Chief Agronomist, Division of Agriculture,
Department of Natural Resources (DNR) Palmer, Alaska, explained
that industrial hemp is Cannabis sativa, which is the same genus
and species as recreational cannabis/marijuana. The two plants
can look similar but industrial hemp traditionally grows in a
solid stand like a barley or wheat. Industrial hemp that is
grown for cannabinoid production may look more similar to
marijuana, whereas it will look more like an extremely tall
stand of corn, barley, or wheat when grown for fiber, grain or
biomass for feed or fuel. The leaves look the same but there is
significantly more fibrous material inside the hemp plant. The
methodology to produce the hemp plant creates an upright leaner
look than in the typical marijuana plant that is grown indoors.
Marijuana plants are grown specifically for the floral material
whereas plants grown for fiber or biomass production are
harvested before the flower appears.
SENATOR STEVENS asked if it is legal to grow marijuana in
Alaska.
MR. CARTER replied that the Alcohol & Marijuana Control Board
regulates all aspects of the growth and production of
recreational marijuana. The 2014 Farm Bill identified industrial
hemp or cannabis that tests below 0.3 percent delta-9-THC as an
industrial agriculture crop. He said the Division of Agriculture
treats these crops much like regulated potato or barley crops,
which are called certified non-grass grain seeds.
SENATOR STEVENS summarized his understanding that industrial
hemp and marijuana are not the same thing and not controlled in
the same way.
CHAIR COSTELLO asked Mr. Whitt to go through the sectional
analysis for SB 27. She also listed the individuals available to
answer questions.
2:05:22 PM
MR. WHITT presented the following sectional analysis for SB 27:
Section 1 AS 03.05.010(a) Page 1, Line 3 through
Page 3, Line 8
Two subsections added to this section authorizing the
commissioner of the Department of Natural Resources to
include the manufacturing and retail sales of products
made from industrial hemp, as well as registration and
renewal procedures, in the regulations for the
industrial hemp program.
2:06:02 PM
Section 2 AS 03.05.076(a) Page 3, Lines 9 through
24
Adds language that a registrant for the industrial
hemp program is not eligible if they had been
convicted of a felony involving a controlled substance
within the last ten years. This section is added to
comply with provisions of the 2018 Farm Bill.
MR. WHITT noted that the 2018 Farm Bill and subsequent
regulations gave grandfather rights to those growing industrial
hemp before the federal requirement. He offered to provide the
code of federal regulations (CFR) reference.
Section 3 AS 03.05.076(i) Page 3, Lines 25 through
28
Adds that the department may develop an industrial
hemp program that complies with federal requirements
and submit a plan for the program to USDA for
approval.
MR. WHITT added that the state is able to continue running the
pilot program until the permanent hemp production program is in
place.
Section 4 AS 03.05.079 Page 3, Line 29 through
Page 4, Line 4
A grower may retain and recondition their crop if it
tests above .3% but below 1.0% THC.
MR. WHITT explained that Sections 4 and 5 work in conjunction
with Amendment 1. Section 4 removes the automatic violation and
allows a grower who tests above 0.3 percent THC but below 1.0
percent THC the opportunity to recondition their crop. Section 5
authorizes the Division of Agriculture to issue a violation if a
bad faith grower fails to recondition their crop that tests
above the 0.3 percent threshold for THC.
2:09:14 PM
SENATOR STEVENS asked what it means to recondition a crop.
MR. WHITT deferred the question to Mr. Carter.
MR. CARTER explained that reconditioning is a commonly used
process in agriculture to allow a farmer to blend crops when the
seed or, in this case, the industrial hemp tests as borderline
in violation of a regulation. Reconditioning prevents a farmer
from having to destroy their crop when it tests too high.
2:10:52 PM
SENATOR REVAK joined the meeting.
SENATOR STEVENS observed that farmers who grow industrial hemp
are subject to many more requirements than a farmer who grows
crops such as wheat or corn. "Aren't we asking a lot more of the
farmers than we would if they were just doing wheat," he asked.
MR. CARTER answered yes; the 2014 and 2018 farm bills have
specific federal requirements that provide a sense of security
to those who do not understand the botanical difference between
industrial hemp and recreational cannabis because they are the
same genus and species. He advised that farmers who produce
certified potatoes or grow certified wheat crops also are
required to meet specific requirements and are subject to
similarly rigorous testing. He added that industrial hemp was
produced in the state last year and the division is committed to
providing a legal avenue for this new industry.
SENATOR STEVENS expressed appreciation for the explanation.
CHAIR COSTELLO asked if the bill has a mechanism to handle
repeat violations or if the assumption is that there are no
intentional violators.
MR. WHITT said the division can speak in detail, but the testing
so far has been positive and there is no evidence to indicate
that bad actors will be a problem. He added that he believes it
is a big help for the state to have the USDA stamp of approval
on the industrial hemp program and it comes at the cost of
specific statutory guidelines.
Responding to Senator Stevens, he agreed that the regulatory and
statutory requirements are greater for a hemp producer than many
other crops, but those do not have the potential for high THC.
He characterized the additional guidelines as appropriate.
2:15:31 PM
CHAIR COSTELLO asked Mr. Carter what industrial hemp products
have been produced and if some of the products will be exported.
MR. CARTER replied that farmers produced 70 acres of industrial
hemp in 2020, 9,000 square feet of which was indoors. To ensure
compliance and safety, the division physically samples each
field lot and all the tests returned values of less than half
the federal legal limit for THC, which was better than any other
state in the country.
MR. CARTER said Alaska is renowned for its clean water and soil
and the expectation is that these products will be exported
worldwide for industrial hemp derivatives. In the trial year the
division has seen interest in grain for human and animal
consumption; fiber for biomass for experimental fuel sources,
hempcrete, insulation, fiber bond, and bioplastics; as well as
extraction for non-psychoactive cannabinoid uses for things like
shampoos, salves, and lotions. In 2020, the industrial hemp
industry totaled about $20 billion. He described industrial hemp
as a unique crop that has generated massive interest for an
endless number of uses.
2:19:35 PM
MR. WHITT continued the sectional analysis for SB 27.
Section 5 AS 03.05.079(b) Page 4, Lines 5 through
7
A new subsection adds that a person who retains but
fails to recondition is guilty of a violation.
Section 6 AS 03.05.100(5) Page 4, Lines 8 through
14
Changes the statutory definition of industrial hemp to
match the federal definition which was changed in the
2018 Farm Bill.
Section 7 Page 4, Line 15
Repeals AS 03.05.077 the Industrial Hemp Pilot Program
Section 8 Page 4, Lines 16 through 21
Conditional effect for Section 7 of the bill, in that
the Pilot Program statute is repealed when the
Industrial Hemp Program developed by the department is
approved by the USDA.
Section 9 Page 4, Lines 25 through 27
Effective date language stating that if section 7 is
repealed under the conditions of section 8, the
effective date of section 7 is the day after notice is
received by the revisor of statutes by the
Commissioner of Natural Resources.
MR. WHITT summarized that Sections 7-9 allow the Division of
Agriculture to continue the Industrial Hemp Pilot Program until
the USDA approves DNR's permanent Industrial Hemp Program.
CHAIR COSTELLO asked Ms. Williams to provide her testimony.
2:22:42 PM
SARA WILLIAMS, Founder, Hemp for Healthcare, Wasilla, Alaska,
stated support for 99 percent of SB 27. She did not support the
new language in Section 2 that prohibits individuals who have a
controlled substance felony conviction within the preceding 10
years from contributing to the economy of Alaska by
participating in the industrial hemp program. She advised that
she submitted language that creates a compromise to this
prohibitive language.
MS. WILLIAMS described her vision for an Alaskan hemp industry
that fuels the economy. This includes taxing the hemp biomass
sales and selling the hemp products statewide. The proceeds will
go into a healthcare fund that creates a single payer healthcare
system for all Alaska residents.
She also spoke of new partnerships and anticipated projects that
she believes will bring from 20 to 350 new jobs to Alaska that
is in addition to the boost to transportation, farmers, and
laborers that will grow hemp for processing.
2:30:37 PM
SENATOR STEVENS asked Mr. Whitt if the provision in Section 2
that excludes applicants with a controlled substance felony
conviction within the past 10 years is a federal requirement.
MR. WHITT confirmed that it is a federal requirement in 7 CFR
Sec. 990.6(e)(1). The USDA will not approve an industrial hemp
program in states that do not have that law on the books.
SENATOR STEVENS summarized that while it may be offensive to
some people, removing the provision would result in the USDA
withholding approval for a program to grow hemp in Alaska.
MR. WHITT replied that was his understanding, but he would get
that in writing and present it to the committee.
SENATOR STEVENS replied that would be valuable.
SENATOR HUGHES requested the committee hear from David Schade.
2:32:45 PM
DAVID SCHADE, Director, Division of Agriculture, expressed
appreciation for the work that the sponsor and Mr. Whitt had
done to facilitate an industrial hemp program in Alaska. He said
he had worked on this since becoming the director two years ago.
He related that the pilot program has 117 retail registrations,
and it continues to move forward.
Supplementing earlier discussion, he explained that the division
has worked hard to stay within the federal guidelines, so they
are able to operate their hemp program on a national and
international basis. Because the 2018 Farm Bill stipulates that
someone with a controlled substance felony in the last 10 years
cannot participate in the program, the division requested a one-
year delay in the sunset of the pilot program awaiting this
change in state law. In response to the question about what
happens if there is a bad actor, he explained that because
industrial hemp is a regulated crop, applicants must register
under the USDA program or the state program. Someone who fails
to follow the guidelines will lose their registration and be out
of business.
SENATOR STEVENS asked if he agreed that removing Section 2 would
put the state out of compliance with the federal government and
it would not qualify for a hemp program.
MR. SHADE replied that is correct.
2:35:57 PM
CHAIR COSTELLO held SB 27 in committee for future consideration.
SB 87-REINSURANCE; CREDITS
2:36:06 PM
CHAIR COSTELLO announced the consideration of SENATE BILL NO.
87, "An Act relating to credit for reinsurance; and providing
for an effective date."
2:36:35 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community, and Economic Development, Juneau, Alaska,
explained that the State of Alaska is a member of the National
Association of Insurance Commissioners (NAIC), which puts out
its own standards of accreditation for insurance companies. As a
member, the Division of Insurance has agreed that when it
examines insurance companies such as Alaska National or Umialik
that are domiciled in Alaska, it will use the identical
standards that other member states use. When Alaska National
goes to do business in another state, that director of insurance
knows that company has been reviewed identically to the way that
they look at the insurance companies domiciled in their state.
The savings is that insurance companies that do multistate
business are examined by just one state and the results are
shared with other member states. For that accreditation, each
division of insurance is examined, and its accreditation renewed
if the audit shows that the division's examinations meet the
NAIC standards.
2:38:15 PM
MS. WING-HEIER described reinsurance. She explained that
companies that sell primary insurance are likely to buy
reinsurance behind the primary policy. For example, if State
Farm sells homeowners insurance and an earthquake policy, it is
likely to reinsure the earthquake peril. What SB 87 does is to
look worldwide at where reinsurance is coming from.
MS. WING-HEIER related that the federal government established
the Federal Insurance Office after the Dodd-Frank Act passed.
That office created the covered agreement, first with the
European Union and second with the United Kingdom. Those
agreements establish that the NAIC accreditation standards apply
in the European Union and the United Kingdom. Thus, when a US
company buys reinsurance from a company domiciled in Europe or
the United Kingdom, it is clear that the credit standard of
those foreign companies is the same as if they were domiciled in
the US. Conversely, when US companies sell reinsurance to a
European risk, European countries can trust that those US
companies are financially solvent and have been examined.
She said the foregoing summary of credit for reinsurance shows
how the division looks at the financials of an insurance company
to see what it has ceded to a reinsurance company and what it
has underwritten and is on their books. This analysis is
important to ensure the right ratio and that the insurance
company has sufficient capital to pay the claims of the
consumers in Alaska.
MS. WING-HEIER reviewed the sections of SB 87.
Section 1: The new paragraph (6) on page 10 lays out
what a qualified reinsurer must do to assume the
liabilities of an insurer domiciled in Alaska. The
reinsurer must:
(A) have its head office or be domiciled in a
reciprocal jurisdiction;
(B) have and maintain capital and surplus, or its
equivalent, in an amount set out in regulation;
(C) have and maintain solvency or capital ratio in an
amount set out in regulation;
(D) agree to provide adequate assurances (detailed in
the bill) to the Division of Insurance;
(E) provide documentation the director of insurance
might require;
(F) maintain a practice of prompt payment of claims to
the primary insurer; and
(G) confirm to the director on an annual basis that
they are in compliance with Alaska Statutes
Section 2: clarifies compliance set out in paragraph
(6) in Section 1.
Section 3: defines a reciprocal jurisdiction for a US
company and a non-US company, and that they must meet
certain standards to be a reciprocal jurisdiction.
Section 4: adds a new subsection (i) that requires the
director to consider the list of reciprocal
jurisdictions published by the NAIC. Currently those
are Bermuda, the United Kingdom, France, and Germany.
Section 5: allows the director of insurance to develop
regulations if needed.
2:42:31 PM
SENATOR STEVENS commented on the importance of understanding the
bill because labor and commerce is the only committee of
referral in the Senate.
MS. WING-HEIER confirmed that labor and commerce was the only
referral in the Senate.
CHAIR COSTELLO related her comfort based on this being model
legislation from the National Association of Insurance
Commissioners (NAIC). She asked Ms. Wing-Heier to list the other
state legislatures that have passed similar legislation and the
effect if a state decides to amend the model law.
MS. WING-HEIER described the process for the NAIC to vet and
adopt model legislation as similar to the process a state
legislative body follows. She said the NAIC passed the
reinsurance model law unanimously in 2017 and to prevent
preemption by the federal insurance office, state legislatures
must pass their own reinsurance legislation, based on the model,
by September 2022. She recalled that Vermont, Pennsylvania,
Virginia, Mississippi, and California have adopted the model and
Idaho, Kansas, Iowa, New York, Rhode Island, West Virginia, and
Florida were considering it in 2020 when the pandemic shut
things down.
2:46:46 PM
CHAIR COSTELLO asked Ms. Wing-Heier to make appointments with
each member of the committee to answer any lingering questions
and send her office the written responses to the questions. She
said her staff would visit each office after that to ensure each
member is comfortable with the bill. After that, she would
schedule a second hearing and take public testimony.
CHAIR COSTELLO asked Ms. Wing-Heier to share how long she has
been the director of insurance and her work history prior to
that.
MS. WING-HEIER related that she has been the director of
insurance since she was hired under then Governor Parnell in
2014. Before that, she was with the Marsh & McLennan Agency for
16 years and the corporate risk manager at Arctic Slope for 10
years.
CHAIR COSTELLO asked if the legislature has passed other bills
from the NAIC.
MS. WING-HEIER answered that most of the bills she brings to the
legislature are NAIC vetted.
2:48:43 PM
CHAIR COSTELLO held SB 87 in committee for further
consideration.
2:49:18 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 2:49 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SLAC GOV Appointee Connie Dougherty Board Application_Redacted.pdf |
SL&C 3/8/2021 1:30:00 PM |
SLAC GOV APPOINTEE BBH CONNIE DOUGHERTY |
| SLAC GOV Appointee Tina Taylor Board Application_Redacted.pdf |
SL&C 3/8/2021 1:30:00 PM |
SLAC GOV APPOINTEE BBH TINA TAYLOR |
| SLAC GOV Appointee Khitsana Sypakanphay Board Application_Redacted.pdf |
SL&C 3/8/2021 1:30:00 PM |
SLAC GOV APPOINTEE BBH KHITSANA SYPAKANPHAY |
| SB 27 v. A.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 27 |
| SB 27 Sponsor Statement.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 27 |
| SB 27 v. A Sectional Analysis.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 27 |
| SB 27 Written Testimony Denali Hemp Company.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 27 |
| SB 27 Written Testimony Hemp for Healthcare in AK.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 27 |
| SB 27 Fiscal Note DNR.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 27 |
| SB 27 Amendment No. 1.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 27 |
| SB 87 v. A.PDF |
HL&C 4/12/2021 3:15:00 PM SL&C 3/8/2021 1:30:00 PM |
SB 87 |
| SB 87 Transmittal Letter.pdf |
SL&C 3/8/2021 1:30:00 PM |
SB 87 |
| SB 87 v. A Sectional Analysis.pdf |
HL&C 4/12/2021 3:15:00 PM SL&C 3/8/2021 1:30:00 PM |
SB 87 |
| SB 87 NAIC Credit for Reinsurance Model Law Briefing.pdf |
HL&C 4/12/2021 3:15:00 PM SL&C 3/8/2021 1:30:00 PM |
SB 87 |
| SB 87 Fiscal Note 1.pdf |
HL&C 4/12/2021 3:15:00 PM SL&C 3/8/2021 1:30:00 PM |
SB 87 |