California Wants to Impose Insurance Surcharge to Develop Emergency Fund

April 27, 2010

The California Senate Banking, Finance and Insurance Committee has passed a bill that, among other things, would impose a surcharge of 4.8 percent on commercial and residential fire and multiperil insurance policies to assist the state with the creation of an Emergency Response Fund in the State Treasury.

California has already established the California Emergency Management Agency to manage emergency and disaster response services, including activities necessary to prevent, respond to, recover from and mitigate the effects of emergencies and disasters to people and property. SB 1258 would require funds to be deposited into the Emergency Response Fund to be allocated to the program. The bill would also require the Secretary of California Emergency Management to allocate funds to specific entities to enhance or sustain fire and rescue disaster mutual aid capacity to combat the effect of all hazard disasters, according to the bill text.

The special purpose surcharge imposed on insurers would apply to all policies with combined property and liability coverage issued or renewed on or after July 1, 2010.

The Governor’s office estimates the surcharge will generate $238 million in the current year, and about $480 million annually from 2011 on.

The bill is scheduled to be heard in the Senate Appropriations Committee.

Source: California Legislature

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