Legislature(2021 - 2022)BELTZ 105 (TSBldg)
03/23/2022 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB160 | |
| SB174 | |
| HB133 | |
| SB233 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 160 | TELECONFERENCED | |
| *+ | SB 234 | TELECONFERENCED | |
| + | HB 133 | TELECONFERENCED | |
| *+ | SB 233 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 174 | TELECONFERENCED | |
SB 160-FLOOD INSURANCE
1:31:06 PM
CHAIR COSTELLO announced the consideration of SENATE BILL NO.
160 "An Act providing a premium tax credit for flood insurance;
relating to flood insurance; relating to property insurance;
establishing the Alaska Flood Authority and the Alaska flood
insurance fund; and providing for an effective date."
CHAIR COSTELLO stated that this is the first hearing and the
intention is to hear the introduction and take invited and
public testimony.
1:31:39 PM
SENATOR BERT STEDMAN, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 160, introduced the legislation. The sponsor
statement read as follows:
SB 160 has been introduced to protect Alaskans from
financial abuse at the hands of the Federal Emergency
Management Agency (FEMA).
Over the past 5-years, FEMA has expanded its 'flood
zone' maps and for the first time ever, hundreds and
possibly thousands of homes and businesses will now be
in a federally designated 'high risk' zone. Virtually
none of these homes or businesses have ever
experienced a flood and are unlikely to flood in the
future.
Homes and businesses in a new FEMA flood zone could
see significant negative impacts to property values
from requirements to purchase expensive flood
insurance (flood insurance must be purchased if the
owner uses a federally insured bank). Also, the new
and expanded flood zones can also restrict how a
structure is built on private property and impact
existing homes and businesses that want to
rehabilitate, upgrade, expand, and repair building.
FEMA administers the National Flood Insurance Program
(NFIP). The NFIP was created to share the risk of
flood losses (nationwide) via flood insurance. The
program enables property owners in participating
communities to purchase insurance protection,
administered by the government, against losses from
flooding, and requires flood insurance for all loans
or lines of credit that are secured by existing
buildings, manufactured homes, or buildings under
construction, located in the FEMA Flood Zone in a
community that participates in the NFIP.
1:33:56 PM
Currently, Alaskans are paying flood insurance to
offset the billions in hurricane losses in the Lower
48. Combine this with very few payouts to flood
victims and it can easily be concluded that the NFIP
doesn't work for Coastal Alaskans.
It is the intent of SB 160 to supplant the NFIP with
an Alaska based insurance program that keeps the
premium payments in Alaska, benefitting Alaskans.
SENATOR STEDMAN stated that he contacted the Division of
Insurance to discuss addressing this issue by creating an Alaska
insurance program that sets premiums commensurate to the losses
and overhead to administer the program. He highlighted that
FEMA's focus on limiting waterfront development in coastal
Alaska to reduce risk would no longer be an issue if Alaska had
its own insurance program.
CHAIR COSTELLO asked if he was aware of other states that have
started their own insurance program.
SENATOR STEDMAN answered no, but his office would do a little
research to provide a more accurate answer.
CHAIR COSTELLO said it would also be interesting to look at the
miles of coastline in Alaska compared to other coastal states.
She asked Mr. Scott to walk through the sectional analysis.
1:43:10 PM
DAVID SCOTT, Staff, Senator Bert Stedman, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for SB 160. It read as follows:
[Original punctuation provided.]
Section 1 Amends AS 21.09.210 to add
A Qualified insurer in the Alaska Flood Authority
is entitled to a premium tax credit.
Section 2 Amends AS 21.39.030(a) to add
Flood insurance rates must made with
consideration of historical flood and damage on
real and personal property to be insured.
Section 3 amends 21.39.030(c) to add
Definition of 'flood'.
Section 4 Adds 21 subsections (AS 21.60.100 thru
.300) creating the "Alaska Flood Authority".
AS 21.60.100 Creation & Membership
Creates Flood Authority. Membership includes
all licensed property insurers. Membership
is required and they must submit reports or
provide information as required by the Board
or the Director.
AS 21.60.110 Board; Organization; Report
Creates 7-member Board for the Alaska Flood
Authority:
• 3 selected by Authority members,
subject to Director's approval.
• 2 selected by Director who represent
consumers.
• 1 selected by director who represents
banks.
• 1 selected by director who represents
AHFC.
Requires an annual report of operations to:
• Analyze effectiveness.
• Evaluate the benefits in comparison to
the National Flood Insurance Act.
• Identify penalties imposed or
potentially imposed on individuals and
communities by the federal government.
1:45:04 PM
AS 21.60.120 Powers of Authority
The Authority may:
• Exercise powers granted to insurers
under laws of the state.
• Sue or be sued.
• Enter into contracts with insurers,
similar authorities in other states for
the performance of administrative
functions.
• Establish administrative and accounting
procedures.
• Receive funds from sources other than
members.
AS 21.60.130 Plan of Operation
Requires Authority to submit a plan of
operations. The Director must approve and
may adopt regulations to carry out the
provisions. Members are required to comply
with the plan.
AS 21.60.140 Administrative Procedures Act
Authority is exempt from the Administrative
Procedures Act.
AS 21.60.150 Tax Exemption
Authority is exempt from fees and taxes of
the state or political subdivisions, except
property taxes.
AS 21.60.160 Types of Insurance Plans
Requires Authority to provide at least one
state plan of flood insurance.
AS 21.60.170 Coverage & Terms
Requires state flood insurance plan to be
the same as coverage provided by the
National Flood Insurance Program. Further
defines terms of state flood insurance plan.
AS 21.60.180 State Plan Premiums
Rates must not be discriminatory. Board must
use actual historical flood and damage data
to determine rates. The Director must
approve rates before use.
AS 21.60.190 Duties of Authority
The Authority shall:
• Perform administrative and claims
payment required.
• Provide a policy statement to enrolled
persons.
1:46:58 PM
AS 21.60.200 Funding; Penalties; Premium Tax
Credit
Each member of the authority shall share in
the losses, pay dues, and share in the
operating and administrative expenses.
Calculates member's liability and requires
board to make annual assessment. Addresses
failure to pay assessments. Provides for a
premium tax credit of 50% of assessment. If
the amount of assessments is insufficient to
satisfy a claim, the Legislature may
appropriate up to $10m to DCCED.
AS 21.60.210 Eligibility
Authority determines eligibility. Director
may impose additional requirements.
AS 21.60.220 Enrollment by Eligible Person
A person must apply to enroll in a state
plan.
AS 21.60.230 Response by the Authority
Authority must reject or accept within 90
days.
AS 21.60.240 Effective Date of Insurance
Insurance takes effect upon receipt of first
premium. Retroactive if plan expires and
person re-applies within 60 days and pays
premium.
AS 21.60.250 Solicitation of Eligible Persons
The Authority shall inform persons in a
special flood hazard area the existence of a
state flood insurance plan.
1:49:00 PM
AS 21.60.260 Duties of Director of Insurance
Requires Director to formulate general
policy and adopt regulations to administer
the State Flood Insurance Program. The
regulations must establish a reserve of
payment or flood claims and require the
amount held in reserve an amount required by
a private insure participating in the
National Flood Insurance Program based on a
similar risk profile.
AS 21.60.270 State not Liable
State is not liable for acts or omissions of
the Authority.
AS 21.60.280 Board Member Civil & Criminal
Immunity
Board member not liable if acting in good
faith.
AS 21.60.290 Alaska Flood Insurance Fund
Establishes Alaska Flood Insurance Fund.
Money in the Fund does not lapse.
AS 21.60.300 - Definitions
1:50:06 PM
Section 5 Amends AS 37.05.146(c) to add
Assessments and civil penalties of the Alaska
Flood Authority to the list program receipts.
Section 6 Uncodified Law: Applicability
Section 2 applies to policies/renewals after the
effective date of this Act.
Section 7 Uncodified Law: Transition
Director may adopt regulations if the Authority
does not submit a suitable plan of operation by
January 1, 2023.
Section 8 Effective Date
Immediate effective date for Section 7.
Section 9 Effective Date
July 1, 2022 effective date.
CHAIR COSTELLO asked whether any federal action would be
necessary to allow Alaska to stop participating in FEMA's
National Flood Insurance Program.
MR. SCOTT deferred the question to Ms. Wing-Heier.
CHAIR COSTELLO asked Mr. Scott to discuss the funding mechanism
for the bill.
MR. SCOTT asked if she was referring to the $2 million fiscal
note.
CHAIR COSTELLO answered yes.
1:52:16 PM
MS. SCOTT offered his understanding that the fiscal note
reflects the cost to establish a reserve to cover any claims
that may be filed immediately after the program is implemented.
He deferred further explanation to Ms. Wing-Heier.
CHAIR COSTELLO asked Ms. Wing-Heier to talk about the bill, how
it would work, and what her role would be as the director of the
Division of Insurance.
1:53:39 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), Anchorage,
Alaska, agreed with the sponsor that flood premiums in Alaska
are prohibitive. So much so that some people have been unable to
sell their property because interested buyers could not afford
the premiums. She said the funding for the National Flood
Insurance Program (NFIP) that FEMA manages is upside down and a
political football. Right now the program is funded until just
September 30, and if it's not funded after that it will be
necessary to take action to help property owners.
MS. WING-HEIER stated that the division is a member of the
National Association of Insurance Commissioners (NAIC). As such,
it has been working diligently with other members to find
private property insurers to step in and provide coverage in
Alaska and all the other coastal states where flooding routinely
occurs. She said insurers are willing to write policies but
banks and mortgage holders require insurance policies to come
from the National Flood Insurance Program (NFIP). She said she
can't argue with what the sponsor is saying, but the bill does
need some work and her understanding is that it will be done
during the interim.
MS. WING-HEIER referenced the large fiscal notes and explained
that the Division of Insurance currently collects a 2.7 percent
tax on every insurance policy that is sold. SB 160 imposes an
additional 6 percent tax to fund the Alaska Flood Authority then
provides a 50 percent credit. This reduces the premium taxes the
state collects by about $41-45 million. Based on the additional
6 percent tax, the fund is expected to collect more than $90
million a year. She said this is a problem, but if the
legislature decides to move forward with a program, the division
will work cooperatively to make it happen.
1:57:30 PM
CHAIR COSTELLO asked if the requirement for mortgage holders to
have insurance policies from the National Flood Insurance
Program (NFIP) could be addressed in state statute.
MS. WING-HEIER replied she didn't know that amending state
statutes would help when the requirement is in federal statute.
CHAIR COSTELLO noted who was available to answer questions.
1:58:24 PM
CHAIR COSTELLO opened public testimony on SB 160; finding none,
she closed public testimony.
1:58:40 PM
CHAIR COSTELLO held SB 160 in committee for future
consideration.