Legislature(2015 - 2016)BARNES 124
04/18/2015 09:00 AM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB15 | |
| SB107 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 107 | TELECONFERENCED | |
| + | SB 15 | TELECONFERENCED | |
SB 107-INSURANCE; RISK MG'T; HOLDING COMPANIES
1:19:51 PM
CHAIR OLSON announced that the next order of business would be
SENATE BILL NO. 107, "An Act relating to insurance; relating to
risk based capital for domestic insurers and fraternal benefit
societies, including provisions related to insurers subject to
risk based capital and action level event requirements; relating
to review by the director of insurance of an insurer's risk
based capital plan; relating to confidentiality and sharing of
certain information submitted to the director of insurance;
relating to evaluating an insurance holding company and the
acquisition of control of or merger with a domestic insurer;
relating to risk based capital, risk management, and own risk
and solvency assessments of insurers; clarifying provisions
related to risk based capital plans; relating to exemptions by
the director of insurance for certain domestic and casualty
insurers from risk based capital requirements; relating to
insurance holding companies, including filing requirements,
divestiture, content of statements, notifications, and hearings;
relating to registration requirements of insurers; relating to
transactions within an insurance holding company system or
transactions involving a domestic insurer; relating to
management and examination of domestic insurers that are part of
an insurance holding company system; adding provisions relating
to participation by the director of insurance in a supervisory
college; relating to civil and criminal penalties for violations
by insurers and individuals; relating to provisions for risk
management and own risk and solvency assessments by insurers;
relating to operating requirements for controlling insurance
producers; relating to producer-controlled insurers; adding and
amending definitions related to insurers; and providing for an
effective date."
1:20:14 PM
WESTON EILER, Staff, Senator Mia Costello, Alaska State
Legislature, on behalf of the Senate Labor & Commerce Committee,
Senator Mia Costello, Chair, explained that SB 107 would update
Alaska's insurance statutes to comply with national standards
and maintain the accreditation of the Division of Insurance,
Department of Commerce, Community & Economic Development
(DCCED). The provisions in the bill would bring Alaska's
insurance laws in line with federal law and national industry
best practices. The provisions in the bill have been thoroughly
vetted by the department, stakeholders, industry, and this
committee [passed out the companion bill, HB 164 on 3/25/15].
He deferred to the Division of Insurance to answer technical
questions and the importance to the division.
1:21:23 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community, & Economic Development (DCCED), provided a
brief section-by-section analysis of SB 107. She stated that
Section 1 pertained to risk-based capital and would adopt the
model law 315 and amendments to model law 312 [adopted by the
National Association of Insurance Commissioners (NAIC). She
stated that risk-based capital considers the solvency of the
insurance company, taking into account what they are doing for
underwriting, investments, and measuring against the ratio. She
directed attention to the first six pages of the bill related to
AS 21.14, which references risk-based capital plan and the
regulatory control events to measure whether the company is
solvent or not, and if not, the Division of Insurance will step
in for liquidation. She directed attention to Section 2,
beginning on page 8, to Section 20, which relates to the
insurance holding companies. This would make amendments to
model law 440 [passed by the National Association of Insurance
Commissioners (NAIC), in particular, as the state considers
holding companies as an "umbrella" would allow the division to
identify other companies within the umbrella. She explained
that currently the division can see the insurance company that
is domiciled in Alaska, but with these changes, the division
will be able to identify the other entities within the holding
companies to determine whether the companies are subsidizing one
another or what the interactions are, including their financials
and identify any problems that may impact the insurer doing
business in Alaska.
1:24:01 PM
MS. WING-HEIER remarked that the insurance holding company was
the biggest part of this bill, through Section 46. She directed
attention to Section 46, related to ORSA [Own Risk and Solvency
Assessment]. She said this provision would be new to the state,
which places the onus on insurers to file a risk management
report or an ORSA to identify relevant risks, not previously
identified for the division outside of a normal financial
examination.
CHAIR OLSON added that this bill would incorporate the National
Association of Insurance Commissioners (NAIC) model law to
ensure that all states are in line.
1:25:09 PM
MS. WING-HEIER acknowledged that everything in this bill was
based on the NAIC model law, with a small portion of the bill
consisting of technical drafting changes made to comport to the
legislature's drafting style. She said the last section of the
bill, Section 47 would amend provisions related to insurance
producer agents, administration, and brokers. She directed
attention to page 29, which would remove the requirement to send
certified mail, and adds insurance producers instead of
licensees, since the division would not have licensees. In
response to Representative Hughes, she directed attention to
page 23, Section 46, AS 21.23.030, which was a new provision
related to Own Risk and Solvency Assessment (ORSA) Summary
Report based on the National Association of Insurance
Commissioners (NAIC) model law.
MS. WING-HEIER reiterated that Section 47 would provide an
update to producer agents since the state did away with
licensees who are now insurance producers, to be in compliance
with NAIC model. She directed attention to page 32, Sections 49
and 50, which would update the definition of "controlled
insurer" to be in compliance with NAIC model law. Finally,
Section 51 made technical changes, she said.
1:27:11 PM
REPRESENTATIVE JOSEPHSON recalled that parts of the bill that
members had concerns with in the House companion bill [HB 164]
were relative to discovery and confidentiality. He asked
whether those provisions were stripped from SB 107.
MS. WING-HEIER answered yes; that the word "privileged" was
removed from SB 107. She referred to a memo from the Department
of Law in members' packets [from Daniel Wilkerson dated April
15, 2015] explaining what privileges are still left in AS 21.06
that would extend to insurers as to confidential provisions.
1:28:08 PM
REPRESENTATIVE JOSEPHSON asked whether anything in the bill
would alter current law. He appreciated knowing that the memo
was in members' packets. He asked whether that was the best
source to answer his question.
MS. WING-HEIER offered her belief that it will. She related her
understanding that the concern did not relate to the
confidentiality, but with the word, "privilege." The word
"privilege" has been removed from the bill.
1:28:40 PM
CHAIR OLSON directed attention to the memo from Daniel Dickinson
to Lori Wing-Heir, Director of the Division of Insurance, dated
April 15, 2015.
[The committee did not take an at-ease but took a moment to
review the document.]
1:30:26 PM
MR. EILER, in response to Chair Olson, stated that comments
mentioned by Representative Josephson and other members of the
legislature were addressed in SB 107.
1:30:45 PM
REPRESENTATIVE LEDOUX asked for a page reference for AS
21.06.060.
MS. WING-HEIER answered that AS 21.06.060 relates to
confidentiality. She was not certain if that provision was in
the bill, but the foregoing statute describes the protections
granted to information and records designated as confidential or
not available for public inspection by the director, [which also
extends to electronic data], or basically the documents the
division holds confidential related to documents collected for
examination of certificates for the transaction of insurance in
Alaska.
CHAIR OLSON suggested that copies of AS 21.06.060 were being
distributed to members.
1:31:31 PM
REPRESENTATIVE LEDOUX asked for a moment to review a document.
1:32:01 PM
REPRESENTATIVE LEDOUX directed attention to AS 21.06.060(g),
which read, as follows:
(g) The director may withhold information or records
from public inspection for as long as the director
finds the withholding is
(1) necessary to protect a person against
unwarranted injury; or
(2) in the public interest.
REPRESENTATIVE LEDOUX asked for examples of the types of
information that wouldn't be considered confidential under any
of the aforementioned provisions, but would be considered
confidential under this "catch all" language.
1:32:45 PM
MS. WING-HEIER replied that in the new "ORSA" [Own Risk and
Solvency Assessment], Chapter 23, insurers will be asked to
provide information on any mergers and acquisitions. However,
in the normal course of business [insurers] will not want their
competitors to have access to any merger or acquisition
information the companies are considering. The insurers would
ask the division to keep that information confidential until the
mergers or acquisitions were made public, she said. Thus, this
would be information withheld from the public, but would be
declared in the reporting to the division.
1:33:36 PM
CHAIR OLSON asked whether that was a result of the American
International Group [AIG].
MS. WING-HEIER answered yes.
1:33:50 PM
REPRESENTATIVE JOSEPHSON referred to paragraph (2) of the
aforementioned April 15, 2015, memo from the Department of Law
to the Division of Insurance, which suggests there would be a
presumption of confidentiality that could be overcome; however,
he acknowledged that this is complicated. He asked for a
prediction of when this might reach the House floor for a vote.
CHAIR OLSON suggested that it would likely be today or tomorrow.
He offered to set up an appointment for Ms. Wing-Heier to meet
with members.
MS. WING-HEIER advised the aforementioned provision [paragraph
(2)] in AS 21.06.060 is existing law and SB 107 does not make
any changes to those provisions. She stated this language
merely clarifies what remains in statute since the provision
related to "privilege" was not added to SB 107.
1:36:12 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on SB 107.
1:36:26 PM
REPRESENTATIVE HUGHES moved to report SB 107 out of committee
with individual recommendations and the accompanying fiscal
note. There being no objection, SB 107 was reported from the
House Labor and Commerce Standing Committee.