HB 514 - RISK BASED CAPITAL FOR INSURERS Number 029 DAVE WALSH, Director, Division of Insurance, Department of Commerce and Economic Development, presented HB 514. Mr. Walsh stated that HB 514 establishes a new way to determine insurance companies' solvency in Alaska. Alaskan insurers fair well under this proposed risk based capital legislation and currently have capital and surplus levels higher than the amount indicated in the risk based capital formula. MR. WALSH went on to say this proposed risk based capital legislation is based on the NAIC (National Association of Insurance Carriers) risk based capital model law that has been adopted as a minimum standard for state accreditation under the NAIC Accreditation Program. The NAIC Accreditation Program establishes minimum standards of regulation through adoption of statutes and procedures. State accreditation is granted by the NAIC after an on-site review verifying that these minimum standards are met. The Alaska Division of Insurance received its accreditation in December 1992 and is committed to maintaining the standards of the NAIC Accreditation Program. MR. WALSH provided a position paper and sectional analysis on HB 514, which is available in the committee files. MR. WALSH stated that consumers, industry, Alaskan domestics and the department is supportive of HB 514. MR. WALSH proposed an amendment that included a number of changes, mostly technical. Mr. Walsh stated these amendments were adopted in the Senate version of the bill. Number 261 REP. PORTER asked if there was a percentage that is considered for investment as opposed to risk. Number 266 MR. WALSH responded yes. He stated that there were a number of different triggers for a review of an insurance company's investment. One of them is that no company can invest more than 5% of its assets in one type of investment without approval of the regulator. Number 297 REP. MULDER asked if HB 514 would increase the likelihood of insolvency. Number 302 MR. WALSH stated he believed it would decrease the likelihood of insolvency because it would trigger the times when regulators would step in. Number 325 REP. MULDER asked what it would mean for State Farm and other national outfits. Number 340 MR. WALSH answered that it would mean very little to them. If anything, it could have a very positive affect on the market. Number 350 REP. PORTER moved Amendment 1 offered by Mr. Walsh. No objections were heard; it was so ordered. Number 360 REP. MULDER moved CSHB 514(L&C) with individual recommendations and zero fiscal notes. No objections were heard; it was so ordered.