03/24/1994 03:00 PM House L&C

  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.