03/20/2020 03:15 PM House LABOR & COMMERCE

           SB 195-BD OF DIRECTORS: DOMESTIC INSURERS                                                                        
                                                                                                                                
3:18:03 PM                                                                                                                    
                                                                                                                                
CHAIR SPOHNHOLZ announced that the  first order of business would                                                               
be  SENATE BILL  NO.  195,  "An Act  relating  to  election of  a                                                               
domestic insurer's board of directors."                                                                                         
                                                                                                                                
3:18:37 PM                                                                                                                    
                                                                                                                                
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community  & Economic Development, stated  that in 2019                                                               
Moda  Health  applied  for  a  certificate  of  authority.    The                                                               
Division  of   Insurance  had  not  received   a  certificate  of                                                               
authority  application to  establish a  domestic insurer  that is                                                               
headquartered or incorporated within  the state for approximately                                                               
35 years.   During  the process, the  division noticed  that Moda                                                               
Health would not  be in compliance with AS  21.69.340(b) based on                                                               
the    insurers     organizational   structure,    articles    of                                                               
incorporation, and  bylaws.  She  said further  research revealed                                                               
that 44  jurisdictions had revised  or eliminated  their statutes                                                               
that mandate the  board of directors be elected  from the members                                                               
or  stockholders.   She reported  that the  matter recurred  when                                                               
CopperPoint purchased Alaska National  Insurance Company in 2019.                                                               
Investors were  concerned that the  division - knowing  that this                                                               
was a  compliance issue -  would take enforcement  action leading                                                               
to fines  and penalties.   She explained  that the  division with                                                               
the agreement  with the governors   office and the  Department of                                                               
Law, went  on record  to say  that they  would address  taking no                                                               
enforcement action  with the administration and  the legislature.                                                               
She stated  that the intent  of this  legislation is to  clean up                                                               
the issue of compliance.                                                                                                        
                                                                                                                                
3:21:02 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  paraphrased the  sectional analysis  [included in                                                               
the committee packet]  for SB 195, which read in  its entirety as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     Section 1. AS 21.69.340(b)                                                                                               
                                                                                                                                
     Eliminates the  mandate that the board  of directors be                                                                    
     elected from  and by the  members or stockholders  of a                                                                    
     domestic  insurer. Provides  that,  unless contrary  to                                                                    
     the bylaws  of the  insurer, board  members (directors)                                                                    
     need not be a member or a stockholder of the insurer.                                                                      
                                                                                                                                
     Section 2. AS 21.69.350                                                                                                  
                                                                                                                                
        As respects domestic stock life insurers, amends                                                                        
      statute to allow policyholders to participate in the                                                                      
     election of directors without stockholders.                                                                                
                                                                                                                                
3:22:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN pointed  out that  there are  currently no                                                               
domestic stock life insurance holders  in Alaska.  She questioned                                                               
whether Section 2 could be modernized  so that it applies to life                                                               
insurance holders as they operate in the state.                                                                                 
                                                                                                                                
MS.  WING-HEIER  acknowledged that  the  state  does not  have  a                                                               
domestic  life   insurer,  much   less  a  stock   life  insurer;                                                               
therefore,  Section  2  could  be  deleted  without  consequence.                                                               
Nonetheless,  she stated  that the  individuals  who drafted  the                                                               
bill decided  to fix the  section now,  rather than come  back to                                                               
the legislature to change it later  when there is a domestic life                                                               
insurer in Alaska.                                                                                                              
                                                                                                                                
REPRESENTATIVE  HANNAN  sought  to clarify  that  throughout  the                                                               
insurance  statutes,  the term   domestic   is  defined as  being                                                               
incorporated in Alaska.                                                                                                         
                                                                                                                                
MS. WING-HEIER  confirmed that.   She noted  that Alaska  has six                                                               
domestic  insurance  companies:  Moda Health,  Umialik  Insurance                                                               
Company,  Alaska  National  Insurance Company,  ARECA  Insurance,                                                               
Tongass Timber Trust, and Alaska Timber Insurance Exchange.                                                                     
                                                                                                                                
CHAIR SPOHNHOLZ  clarified that SB  195 essentially  broadens the                                                               
eligibility  criteria for  being a  director on  the board  of an                                                               
insurance company.                                                                                                              
                                                                                                                                
MS. WING-HEIER answered yes.                                                                                                    
                                                                                                                                
3:25:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES  moved to  report SB  195 out  of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.  Without objection, SB 195  was moved from the House Labor                                                               
and Commerce Standing Committee.                                                                                                
                                                                                                                                
3:25:29 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:25 to 3:27 p.m.                                                                            
                                                                                                                                
3:27:41 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
3:27:47 PM