Bill Text: CA SB11 | 2021-2022 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: The California FAIR Plan Association: basic property insurance: exclusions.

Spectrum: Bipartisan Bill

Status: (Passed) 2021-07-23 - Chaptered by Secretary of State. Chapter 128, Statutes of 2021. [SB11 Detail]

Download: California-2021-SB11-Amended.html

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Amended  IN  Senate  March 01, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill

No. 11

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Introduced by Senator Rubio

December 07, 2020

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An act to add and repeal Chapter 12 (commencing with Section 10109) of Part 1 of Division 2 amend Sections 10091 and 10094 of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL'S DIGEST

SB 11, as amended, Rubio. Residential property insurance: ratemaking strategies. The California FAIR Plan Association: basic property insurance: exclusions.

Under existing law, the California FAIR Plan Association, is a joint reinsurance association in which all insurers licensed to write basic property insurance participate in administering a program for the equitable apportionment of basic property insurance for persons who are unable to obtain that coverage through normal channels. Existing law defines “basic property insurance” for these purposes, and excludes from that definition insurance on automobile or farm risks.

This bill would modify that definition by deleting the reference to farm risks, and would instead exclude agricultural crop risks from that definition. The bill would make other technical, nonsubstantive changes to these provisions.

The Insurance Rate Reduction and Reform Act of 1988, an initiative measure enacted by Proposition 103, as approved by the voters at the November 8, 1988, statewide general election, prohibits specified insurance rates from being approved or remaining in effect that are excessive, inadequate, unfairly discriminatory, or otherwise in violation of the act. The act requires an insurer that wishes to change a rate to file a complete rate application with the Insurance Commissioner, as specified.

This bill would require the commissioner to convene a stakeholder group of expert parties to identify ways to measure and incorporate various fire damage mitigation strategies into the homeowners’ insurance ratemaking process and to report the group’s findings to the Legislature no later than December 31, 2023.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YESNO   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 10091 of the Insurance Code is amended to read:

10091.

 Unless the provision or context otherwise requires, the following definitions shall govern the construction of this chapter:

(a) “Association,” “industry placement facility,” or “facility,” means a joint reinsurance association (the association, the California FAIR Plan Association), Association, formed by insurers licensed to write and engaged in writing basic property insurance within this state to assist persons in securing basic property insurance and to formulate and administer a program for the equitable apportionment among such insurers of such basic property insurance.

(b) “Commissioner” means the Insurance Commissioner of this state.

(c) (1) “Basic property insurance” means insurance against direct loss to real or tangible personal property at a fixed location in those geographic or urban areas areas, as designated by the commissioner, from perils insured under the standard fire policy and policy, extended coverage endorsement endorsement, and vandalism and vandalism, malicious mischief mischief, and such other insurance coverages as may be added with respect to such that property by the industry placement facility with the approval of the commissioner or by the commissioner, but shall not include and excludes insurance on automobile or farm agricultural crop risks.

For

(2) For the purposes of earthquake coverage that is provided as a component of basic property insurance, the association shall sell only the policy described in Section 10089. In force policies of basic property insurance that include earthquake coverage shall be renewed with the coverage specified in Section 10089, and the association shall comply with the notice requirements of paragraph (2) of subdivision (a) of Section 10086.

(d) “Inspection bureau” means the organization or organizations designated by the association with the approval of the commissioner to make inspections to determine the condition of the properties for which basic property insurance is sought and to perform such other duties as may be authorized by the association.

(e) “Premiums written” means gross direct premiums charged with respect to property in this state on all policies of basic property insurance and the basic property insurance premium components of all multiperil policies, less return premiums, dividends paid or credited to policyholders, or the unused or unabsorbed portions of premium deposits.

(f) “Insurer” means any a person who undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event, and shall include reciprocals and interinsurance exchanges.

SEC. 2.

 Section 10094 of the Insurance Code is amended to read:

10094.

 Within 30 days after the effective date of this chapter, with the approval of the commissioner, all insurers licensed to write and engaged in writing in this state, on a direct basis, basic property insurance or any component thereof in multiperil policies, shall establish an industry placement facility, the California FAIR Plan Association, to formulate and administer a program for the equitable apportionment among such insurers of basic property insurance which that may be afforded to persons having an interest in real or tangible personal property who, after diligent effort (as effort, as specified in subdivision (a) of Section 10093), 10093, are unable to procure such insurance through normal channels from an admitted insurer or a surplus line broker. Each such insurer, as a condition of its authority to transact such those kinds of insurance in this state, shall participate in such an industry placement facility program in accordance with rules to be established by a governing committee consisting committee, composed of nine insurers elected annually elected in the manner to be provided in the program. The governing committee shall, in addition, shall also have as nonvoting members one representative of insurance agents, one representative of insurance brokers, one representative of surplus line brokers, and one representative of the public, each to be appointed by the Governor. The governing committee may establish separate classifications of written premiums for the purpose of equitable distribution distribution, but shall not include premiums from automobile or farm agricultural crop risks. The program may also provide, with the approval of the commissioner, for assessment of all members in amounts sufficient to operate the facility, and may establish maximum limits of liability to be placed through the program, reasonable underwriting standards for determining insurability of a risk, and commission to be paid to the licensed producer designated by the applicant.

SECTION 1.Chapter 12 (commencing with Section 10109) is added to Part 1 of Division 2 of the Insurance Code, to read:

12.Ratemaking Strategies

10109.

(a)The commissioner shall convene a stakeholder group of expert parties to identify strategies for measuring and incorporating various community mitigation, vegetation management, and fire resiliency strategies into the homeowners’ insurance ratemaking process.

(b)The commissioner shall report the stakeholder group’s findings to the Legislature no later than December 31, 2023. The report shall be submitted in compliance with Section 9795 of the Government Code.

10109.1.

This chapter shall remain in effect only until January 1, 2026, and as of that date is repealed.