04/19/2007 01:30 PM House FINANCE

HOUSE BILL NO. 170                                                                                                            
                                                                                                                                
     An Act relating to annual  audit reports by insurers, to                                                                   
     custodians  of  insurer   assets,  to  writing  workers'                                                                   
     compensation  insurance by  surplus  lines insurers,  to                                                                   
     reports by surplus lines  insurers, to the definition of                                                                   
     'wet marine  and transportation insurance,'  to false or                                                                   
     misleading  financial  statements  concerning  insurance                                                                   
     audits,  and to the  membership of  the Alaska  Life and                                                                   
     Health  Insurance  Guaranty Association;  and  providing                                                                   
     for an effective date.                                                                                                     
                                                                                                                                
Vice Chair  Stoltze MOVED to  ADOPT work draft  #25-LS0609\E,                                                                   
Bailey,  4/17/07,  as the  version  of  the bill  before  the                                                                   
Committee.  There being NO OBJECTION, it was adopted.                                                                           
                                                                                                                                
1:42:13 PM                                                                                                                    
                                                                                                                                
ELEANOR WOLFE,  STAFF, REPRESENTATIVE KURT OLSON,  stated the                                                                   
bill had  been introduced at the  request of the  Division of                                                                   
Insurance, Department of Community & Economic Development.                                                                      
                                                                                                                                
LINDA HALL,  DIRECTOR, DIVISION  OF INSURANCE, DEPARTMENT  OF                                                                   
COMMERCE, COMMUNITY AND ECONOMIC  DEVELOPMENT, stated that HB
  relates   to  the  accreditation  of  the   Division  of                                                                   
Insurance and includes other minor  clarifying changes to the                                                                   
insurance code.   The changes  to the work draft  address the                                                                   
oversight  of  the  insurance  industry  by  providing  minor                                                                   
clarifications.   She  addressed  the financial  regulations,                                                                   
providing  a base  for the  solvency  oversight.   It is  the                                                                   
intent through  statutory authority  to adopt the  balance of                                                                   
the  model  regulation.   She  mentioned  the  importance  of                                                                   
accreditation, which  occurs only once every  five years; the                                                                   
Division hopes to be reaccredited.                                                                                              
                                                                                                                                
1:45:08 PM                                                                                                                    
                                                                                                                                
The  committee  substitute reflects  changes  resulting  from                                                                   
industry  discussions  during the  House  Labor and  Commerce                                                                   
hearings.                                                                                                                       
                                                                                                                                
   ·    Section 1 is the most important part of the bill,                                                                       
        placing required language  in statute.   AS 21.09.195                                                                   
        - Registration  for annual preparer  of an  insurer's                                                                   
        audit  financial report.    This  section  was  added                                                                   
        requiring the  director to  establish a  registration                                                                   
        system  for  certified  public  accounts,  conducting                                                                   
        audits on Alaska insurance companies.                                                                                   
                                                                                                                                
1:46:55 PM                                                                                                                    
                                                                                                                                
   ·    Section 3 provides the requirements for custodians                                                                      
        of the insurer assets, AS 21.21.410.                                                                                    
                                                                                                                                
1:47:37 PM                                                                                                                    
                                                                                                                                
There are five other clarifications in the work draft.                                                                          
                                                                                                                                
   ·    Section 2, AS 21.09.200, the insurer annual audited                                                                     
        financial  report.     This  section   clarifies  the                                                                   
        retaliatory  tax used  against  other  states  should                                                                   
        they  use  Alaska's   domestic  insurance   companies                                                                   
        differently.    There  are  three  places  in  Alaska                                                                   
        Statutes that  allow off-sets.   She noted  Section 2                                                                   
        was  duplicative  of  three  other   sections.    The                                                                   
        Division would like to see that language amended.                                                                       
   ·    Section 4, AS 21.34.030(a) - Workers compensation                                                                       
        written in  the surplus line  market, which  replaces                                                                   
        "directives"  with  "order".   Order  is  defined  in                                                                   
        statute.                                                                                                                
   ·    Section 5, AS 21.34.170, the monthly report of                                                                          
        surplus lines broker,  removes the requirement  for a                                                                   
        monthly report to be notarized.                                                                                         
   ·    Section 6, AS 21.34.900(9), provides the definition                                                                     
        of wet  marine  and  transportation  insurance.    It                                                                   
        clarifies  that   the  clauses   are  necessary   for                                                                   
        defining that marine insurance operate separately.                                                                      
   ·    Section 8, AS 21.79.040, Alaska Life and Health                                                                         
        Insurance  Guaranty   Association,   addresses   high                                                                   
        deductible health  plans.  She  noted that  employers                                                                   
        have  been  encouraged  to  offer  deductible  health                                                                   
        plans.                                                                                                                  
   ·    Sections 10 & 11, provide regulations and changes to                                                                    
        the definition of  a member as someone  authorized to                                                                   
        write a line of business.                                                                                               
   ·    Sections 15-17, identifies language of the effective                                                                    
        dates.                                                                                                                  
                                                                                                                                
1:52:22 PM                                                                                                                    
                                                                                                                                
In  response to  comments  made  by Committee  members,  Vice                                                                   
Chair  Stoltze  emphasized  that  insurance  concerns  affect                                                                   
everyone and  that it  is an extremely  important aspect  for                                                                   
the State.                                                                                                                      
                                                                                                                                
1:53:25 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer MOVED  Conceptual Amendment  #1.  Vice  Chair                                                                   
Stoltze OBJECTED to hear a description.                                                                                         
                                                                                                                                
Ms.  Hall  explained  that  the language  in  Section  2  was                                                                   
duplicative  of  Sections 9,  12  & 13.    The intent  is  to                                                                   
clarify  the  calculation  of   retaliatory  fees  to  negate                                                                   
premium tax credit.  The amendment  requests that duplicative                                                                   
language be  deleted.  Additionally,  Line 14  addresses high                                                                   
deductible health  plans, making them compliant  with federal                                                                   
statutes.                                                                                                                       
                                                                                                                                
Vice Chair  Stoltze WITHDREW his  OBJECTION.  There  being NO                                                                   
further OBJECTION, conceptual Amendment #1 was adopted.                                                                         
                                                                                                                                
Representative  Hawker  applauded  the  effort  of  Ms.  Hall                                                                   
addressing concerns of the accounting industry.                                                                                 
                                                                                                                                
1:55:27 PM                                                                                                                    
                                                                                                                                
Representative Foster MOVED to  REPORT CS HB 170 (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying  note.   There  being NO  OBJECTION,  it was  so                                                                   
ordered.                                                                                                                        
                                                                                                                                
CS HB  170 (FIN)  was reported  out of  Committee with  a "do                                                                   
pass" recommendation and with  zero note #1 by the Department                                                                   
of Community & Economic Development.                                                                                            
                                                                                                                                
1:56:17 PM