The California State Legislature has passed Senate Bill 1216, which aligns California law with the Dodd-Frank Wall Street Reform and Consumer Protection Act, with unanimous support.
SB 1216 was authored and carried by Sen. Alan Lowenthal, D-Long Beach, on behalf of California Insurance Commissioner Dave Jones. It updates California insurance law in response to changes in federal law and revisions in the National Association of Insurance Commissioners model laws and regulations.
“I want California to be a safe place for both consumers and for businesses,” Lowenthal said in a statement. “SB 1216 proves that the rights of consumers and business growth do not have to be mutually exclusive. It is a critical step in helping California conform to Dodd-Frank regarding reinsurance, while offering what I believe are critical protections for both consumers and businesses.”
Dodd-Frank impacted the regulatory oversight of reinsurance and reinsurers by states. One provision of Dodd-Frank states that if a U.S. domiciled reinsurer meets certain criteria, the reinsurer’s state of domicile will be the sole regulator of the reinsurer’s solvency and no other state can require information from the reinsurer beyond what is required by the reinsurer’s state of domicile.
NAIC, through its Reinsurance Task Force, is addressing reinsurance provisions contained within the Nonadmitted and Reinsurance Reform Act (NRRA) included in Dodd-Frank. The act prohibits a state from denying credit for reinsurance if the domiciliary state of the ceding insurer recognizes such credit and is an NAIC-accredited state.
Florida and New York have adopted such revisions, and several other states are moving forward with plans to make similar changes.
The ability to keep a closer eye on financial firms other than banks is a major aspect of the Dodd-Frank, which is intended to prevent the chaos that occurred in late 2008 when insurer American International Group Inc. ran into trouble. Ultimately the government rescued AIG with $182 billion in government funds.
SB 1216 now goes to Governor Jerry Brown for his consideration.
“I urge Governor Jerry Brown to sign this bill that will enable the Department of Insurance to continue to protect California consumers to the best of our ability,” Jones said in a statement.