WELCOME TO THE COMMITTEE.
ASSEMBLY COMMITTEE ON INSURANCE.
TODAY WE'RE GOING TO CONSIDER
ONE BILL. LET'S ESTABLISH A
QUORUM. SECRETARY PLEASE CALL
THE ROLL. CALDERON. PRESIDENT
CALDERON HERE. CHEN. CHEN. HERE.
ALVAREZ ALVAREZ. HERE. BAUER.
COHEN. BEAR. COHEN HERE. BERMAN.
HERE. BERMAN. HERE. GIBSON JOAN.
SAWYER. JOAN. SAWYER. HERE.
LOWENTHAL. LOWENTHAL HERE.
ORTEGA. JOE. PATTERSON. JOE.
PATTERSON. HERE PETRIE-NORRIS.
RUBIO. RUBIO. HERE. VALENCIA
WALLACE. WOOD. WOOD. HERE THANK
YOU. WE HAVE A QUORUM,
ASSEMBLYMAN ALVAREZ, WHENEVER
YOU'RE READY, YOU CAN PRESENT ON
AB 2996. THANK YOU. THANK YOU,
MADAM CHAIR. I APPRECIATE THE
OPPORTUNITY TO, TALK ABOUT
ASSEMBLY BILL NINE 2996. I'D
ALSO LIKE TO THANK, YOU AND YOUR
STAFF WHO HAVE BEEN WORKING
DILIGENTLY ON THIS, FROM THE
MOMENT OF INTRODUCTION.
APPRECIATE ALL OF THE
COMMUNICATION AND THE WORK AND
THE FEEDBACK. AB 2996 WOULD
AUTHORIZE THE FAIR PLAN TO
REQUEST THE EYE BANK TO ISSUE
BONDS TO ENHANCE THE SOLVENCY OF
THE FAIR PLAN, AND AUTHORIZES
THE EYE BANK TO ISSUE THOSE
BONDS. AS SOMEONE I'VE SAID IT
BEFORE ON THIS COMMITTEE, I'M
NEW TO THIS COMMITTEE AND
CERTAINLY TO THE ISSUE OF
INSURANCE, THE INSURANCE SPACE,
MY INITIAL INTEREST ON THIS
ISSUE IS ON THE ISSUANCE, THE
INSURANCE CRISIS, AS IT IMPACTS
THE PRODUCTION OF HOUSING. THAT
IS AN ISSUE THAT I AM VERY
FAMILIAR WITH AND I WORK ON VERY
PASSIONATELY, ESPECIALLY FOR
FIRST TIME HOME OWNERSHIP
OPPORTUNITIES BY WAY OF
CONDOMINIUMS OR CONDOS ARE THE
MOST AFFORDABLE HOME BUYING
OPTION FOR CONSUMERS IN MY
DISTRICT, AND PROBABLY YOUR
DISTRICTS AS WELL, AND PRESENT A
PRESENT, A CRITICAL PATHWAY FOR
FIRST TIME HOME OWNERSHIP
OPPORTUNITIES FOR CALIFORNIANS,
AN OPPORTUNITY THAT I THINK WE
ALL REALLY CARE ABOUT.
UNFORTUNATELY AMONG MANY OTHER
CHALLENGES THAT WE'VE HEARD
ABOUT BEFORE IN THIS COMMITTEE,
ONE OF THE ONE OF THE CHALLENGES
FACING THE HOUSING CRISIS IS,
THE ABILITY TO OBTAIN PROPERTY
INSURANCE. AND IN THE ADMITTED
MARKET, WHICH, AGAIN, YOU ALL
KNOW TOO WELL, THIS IS HOW THIS
PROJECT REALLY CAME TO ME. IT'S
A RESULT OF SOMETHING HAPPENING
IN MY DISTRICT IN THE OTAY MESA
COMMUNITY, A BORDER COMMUNITY OF
CALIFORNIA, LOOKING TO BUILD
5000 UNITS, A CONDOMINIUM. TO
RESOLVE THE ISSUE, I WAS
ENCOURAGED TO SEE THE DEPARTMENT
OF FINANCE AND THE FAIR PLAN
ASSOCIATION ANNOUNCED LAST YEAR.
OBVIOUSLY THAT THEY WOULD EXPAND
THE COMMERCIAL INSURANCE
COVERAGE FROM 20 MILLION PER
LOCATION TO 20 MILLION PER
STRUCTURE, ALTHOUGH THAT IS AN
IMPORTANT STEP, IT ALSO PUTS AN
ALREADY OVEREXPOSED FAIR PLAN AT
SIGNIFICANT FINANCIAL RISKS. AS
THE BILL STATES, AS YOU KNOW,
THE FAIR ACCESS TO INSURANCE
REQUIREMENTS, PLAN A FAIR PLAN
WAS ALWAYS INTENDED TO BE AN
INSURER OF LAST RESORT THAT
PROVIDED THE PROPERTY INSURANCE
AND AS AGAIN, WE'VE SEEN HERE
TIME AND AGAIN, IT'S BECOME THE
GO TO GIVEN THE DIFFICULTY IN
OBTAINING INSURANCE IN THE
VOLUNTARY MARKET AND THE RISK OF
CLIMATE DRIVEN WILDFIRES, IT HAS
GROWN BEYOND ITS INITIAL SCOPE.
SO AGAIN, THAT'S HOW WE LANDED
WITH THIS IDEA, BECAUSE WE KNOW
THAT WE ARE ONE SIGNIFICANT
WILDFIRE WILDFIRE AWAY FROM THE
FAIR PLAN, DRAINING ITS RESERVES
TO COVER POORLY POLICYHOLDERS,
WHICH WOULD TRIGGER AN
ASSESSMENT CHARGE ON CARRIERS.
AN ASSESSMENT WOULD RESULT IN
INSURANCE INSURERS IN THE
ADMITTED MARKET HAVING TO COVER
THE FAIR PLAN'S OBLIGATIONS. SO
BY UTILIZING THE BOND MARKET
THROUGH THIS BILL AT THE EYE
BANK, AB 2996 EXTENDS THE
PAYMENT DUE DATE FROM 30 DAYS TO
POTENTIALLY TEN YEARS TO ASSURE
THE ADMITTED MARKET THAT ONE
WILDFIRE WON'T FOUR POTENTIALLY
WON'T FORCE THEM TO IMMEDIATELY
COME UP WITH BILLIONS OF DOLLARS
WITHIN A VERY SHORT PERIOD OF
TIME TO COVER FAIR PLAN'S LOSSES
BY AUTHORIZING THE FAIR PLAN
ASSOCIATION AND THE EYE BANK TO
UTILIZE THE BOND MARKET TO
PROVIDE THE ADMITTED MARKET A
GRADUAL REPAYMENT PROCESS, AGAIN
UP TO TEN YEARS, AB 2996
INCREASES THE FINANCIAL TOOLS
AVAILABLE TO OFFSET THE INCREASE
IN EXPOSURE THAT THREATENS THE
FAIR PLAN THAT WE ARE ALL
WORRIED ABOUT, THERE ARE SOME
CONCERNS THAT YOU HAVE SEEN IN
THE FORM OF A LETTER AND MAYBE
WE'LL HEAR FROM TESTIMONY FROM
THE FAIR PLAN THAT WE
ACKNOWLEDGE. TWO IN PARTICULAR,
THAT THEY, THAT I WANT TO MAKE
SURE YOU KNOW, THAT WE'RE
ADDRESSING FIRST RAISE. THE
FIRST CONCERN IS AROUND WHO
WOULD REPAY THE BOND. THE
INTENTION OF THIS BILL ALWAYS
HAS BEEN AND WILL CONTINUE TO
BE, THAT INSURERS WOULD PAY THE
ASSESSMENT FOR ANY BONDS AND ANY
INTEREST, NOT POLICYHOLDERS.
THIS IS THE SAME WAY IT IS
HANDLED TODAY. IN CASE OF A
DIRECT ASSESSMENT, THE SECOND
CONCERN, THE FAIR PLAN, FAIRLY
RAISES, WHICH IS THE CONCERN
THAT THE PROCESS TO SELL BONDS
WOULD TAKE TOO LONG,
APPROXIMATELY THEY ESTIMATE 6 TO
9 MONTHS TO PROVIDE THE
IMMEDIATE RELIEF NECESSARY TO
ENSURE SOLVENCY IN CASE OF AN
EMERGENCY. AND THAT IS SOMETHING
WE ARE HOPING, WITH THEIR HELP
TO ADDRESS, TO REDUCE THAT
LENGTH OF TIME, CERTAINLY AGREE
THAT WE WANT TO CONTINUE TO WORK
WITH THE FAIR PLAN TO ESTABLISH
THIS SHORT TERM MECHANISM, LIKE
A LINE OF CREDIT IS WHAT THEY
HAVE SUGGESTED TO US TO PROVIDE
ENOUGH RELIEF TO ALLOW FOR THE
BOND PROCESS TO BE EFFECTUATED
MORE, MUCH MORE QUICKLY. SO
WE'RE CONTINUING CONTINUE TO BE
COMMITTED TO WORK, PARTICULARLY
WITH THE FAIR PLAN TO ADDRESS
THESE ISSUES. WITH THAT, I'D
LIKE TO TURN IT OVER TO, THE
BUILDING INDUSTRY ASSOCIATION
FOR SOME TESTIMONY. THANK YOU.
YOU CAN BEGIN. YOU HAVE TWO
MINUTES, PLEASE. THANK YOU.
MADAM CHAIR, DAN DONMOYER,
PRESIDENT AND CEO OF THE
CALIFORNIA BUILDING INDUSTRY
ASSOCIATION. WE'RE THE SPONSOR
OF THIS MEASURE, ONE. I JUST
WANT TO DRAW YOUR ATTENTION TO
THE REALLY GOOD ANALYSIS AND
COMMENTS THAT WERE MADE HERE.
THE KEY THING TO UNDERSTAND IS
THIS THIS BILL IS A VERY
IMPORTANT BILL, BUT IT IS NOT
THE SOLUTION TO THE INSURANCE
CRISIS. IT'S A RECOGNITION, AS
ASSEMBLY MEMBER ALVAREZ SAID OF
THE PROBLEM WE'RE FACING WITH SO
MANY PEOPLE COMING TO THE
BACKSTOP MECHANISM KNOWN AS THE
FAIR PLAN. SO THE SOLUTION TO
THIS IS WHAT THE COMMISSIONER
HAS OUTLINED. IT'S CALLED A
SUSTAINABLE INSURANCE STRATEGY.
HIS SIS WITH THE IMPLEMENTATION
OF THAT STRATEGY, YOU WILL
BRING, WE BELIEVE, THE INSURANCE
MARKET BACK TO ITS NORMAL PLACE
WITH STATE FARM, ALL STATE
FARMERS AT ALL COMING BACK IN
AND GIVING CONSUMER CHOICES. IN
THE MEANTIME, THIS IS AN
IMPORTANT BILL BECAUSE THE
MECHANISM THAT INSURERS ARE
BASICALLY ALLOWING TO HAPPEN IS
FOR THE FAIR PLAN TO GROW. AS
THE ASSEMBLY MEMBER SAID VERY
QUICKLY, FROM $50 BILLION IN
EXPOSURE TO $350 BILLION IN
EXPOSURE TO WHAT THIS BILL DOES.
IS IT MINIMIZES THE NEGATIVE
IMPACT. IF THERE IS A MAJOR FIRE
IN THE NEXT PROBABLY 2 TO 3
YEARS BECAUSE THAT'S HOW LONG IT
WILL TAKE FOR THE FULL EFFORTS
OF THE COMMISSIONER TO COME TO
BEAR IN THAT MEANTIME, IF THERE
IS A FIRE AND IF IT RUNS OUT OF
MONEY, THIS WILL BE A VALUABLE
TOOL TO MINIMIZE THE NEGATIVE
IMPACT OF THE GROWTH OF THE FAIR
PLAN AND THE ASSESSMENT ON
INSURERS AND EVENTUALLY ON
CONSUMERS THROUGH HIGHER PRICES,
VERY QUICKLY, THIS CONCEPT OF
USING THIS THING CALLED THE EYE
BANK, THE INFRASTRUCTURE BANK OF
CALIFORNIA, HAS BEEN USED
EFFECTIVELY IN THE INSURANCE
MECHANISM. WHEN THE WORKERS COMP
MARKET ACTUALLY ATROPHIED IN
2002, THE EYE BANK ISSUED ABOUT
A BILLION AND A HALF DOLLARS IN
BONDS, AND IT SERVED TO MAKE
SURE THAT EVERY INJURED WORKER
IN THE STATE OF CALIFORNIA UNDER
A WORKER'S COMP POLICY WAS PAID.
SO IT'S A TRIED AND TESTED TOOL.
AGAIN, THE BILL IS OPTIONAL. THE
FAIR PLAN MAY USE IT AND THE
COMMISSIONER MAY APPROVE IT. SO
IT'S A BASICALLY IT'S AN
INSURANCE POLICY FOR THE FAIR
PLAN. SO GLAD TO ANSWER ANY
QUESTIONS. MADAM CHAIR MEMBERS,
I'M GLAD TO RESPOND TO ANY
CONCERNS. THANK YOU. DO WE HAVE
ANY ADDITIONAL SUPPORT IN THE
ROOM? MARTY. MATT. GOOD MORNING,
MADAM CHAIR AND MEMBERS. SKYLER
WONACOTT, ON BEHALF OF THE
CALIFORNIA BUSINESS PROPERTIES
ASSOCIATION AND SUPPORT BRANDON
KNAPP, REPRESENTING PERSONAL
INSURANCE FEDERATION OF
CALIFORNIA, IN SUPPORT. THANK
YOU. DO WE HAVE ANY PRIMARY
OPPOSITION IN THE ROOM? ANY
PUBLIC OPPOSITION IN THE ROOM?
OKAY. I'LL BRING IT BACK TO THE
COMMITTEE FOR QUESTIONS. OKAY I
WANT TO START BY THANKING YOU. I
THINK YOU KNOW, AS I MAY HAVE
MENTIONED IN THE LAST HEARING
THAT WE HAD OVER HALF MY CITY
WAS CANCELED IN RECENT DAYS, AND
THEY'RE ALL HAVING TO GO ON THE
FAIR PLAN. AND AS WE SEE
COMMUNITIES FORCED ONTO THE FAIR
PLAN AND NUMBERS LIKE THAT, WE
KNOW THE FAIR PLAN BECOMES MORE
AND MORE PRECARIOUS, IF YOU
WILL, AND I THINK THIS IS ONE OF
THE FEW BILLS WE'RE SEEING
THAT'S ACTUALLY ADDRESSING THE
CRISIS HEAD ON. AND SO I REALLY
APPRECIATE THAT. I AM REALLY
CONCERNED ABOUT, WHETHER THE
FAIR PLAN WILL WITHSTAND A
CATASTROPHIC FIRE. AND SO I
THINK, YOU LOOKING FOR SOLUTIONS
IS REALLY CRITICAL. I WAS HAPPY
TO HEAR THAT THE INSURANCE
FEDERATION WAS HERE, BECAUSE I
WAS WONDERING HOW THEY FELT
ABOUT THIS, SINCE THEY'RE THE
ONES ON THE HOOK PAYING FOR IT,
BUT IT SOUNDS LIKE THEY'RE
SUPPORTIVE FROM WHAT I'M
GATHERING. OKAY. GETTING A HEAD
NOD BACK THERE, BECAUSE ONE OF
THE THINGS I KNOW WE'RE HEARING
FROM INSURANCE COMPANIES IS
THAT, YOU KNOW, HAVING TO CARRY
ALL THIS BURDEN ON THE FAIR PLAN
IS MAKING THEIR BUSINESSES
PRECARIOUS AS WELL. SO WE NEED
TO BE CAREFUL OF THAT BECAUSE WE
DON'T WANT MORE NON-RENEWALS
THAN WE ALREADY HAVE. BUT I DO
THINK IT'S REALLY IMPORTANT THAT
WE MAKE SURE THAT WHATEVER COMES
OUT OF THIS IS SOMETHING THAT
WILL STAND UP, RIGHT? THAT WON'T
HURT THE INSURANCE COMPANIES
SUCH THAT THEY CONTINUE TO LEAVE
. AND, ALSO ENSURES THAT THE
FAIR PLAN WITHSTANDS A
CATASTROPHIC EVENT, BUT I HOPE
THIS GOES HAND IN HAND WITH WHAT
WE'RE SEEING HAPPENING AT THE
INSURANCE COMMISSION, WHICH IS
THE DESIRE TO PULL PEOPLE OFF
THE FAIR PLAN. RIGHT I MEAN, I
THINK THERE'S A REAL EFFORT TO
GET MORE OF THOSE PEOPLE BACK
INTO THE INSURANCE MARKET. AND
THAT'S A REALLY POSITIVE THING
BECAUSE AS I'M SURE WE'RE ALL
AWARE, THE FAIR PLAN IS MUCH
MORE EXPENSIVE THAN THE MARKET.
AND SO I THINK THIS NEEDS TO GO
HAND IN HAND WITH DEPOPULATING
THE FAIR PLAN AND ENSURING IT
HAS A SUSTAINABLE MODEL. BUT I
THINK MORE WORK NEEDS TO GO INTO
IT, AND I HOPE YOU'LL WORK WITH
THE EYE BANK AND OTHERS TO MAKE
SURE THAT THIS IS ACTUALLY A
WORKABLE SCHEME, BECAUSE I THINK
AT THIS POINT IT'S NOT QUITE
THERE YET, BUT I'M HAPPY TO
SUPPORT IT TO MAKE SURE THAT IT
CONTINUES THE CONVERSATION ON
WHAT I HOPE WILL BE A REAL
SOLUTION IN THIS SPACE. THANK
YOU, THANK YOU. DO WE HAVE ANY
OTHER QUESTIONS FOR THE AUTHOR?
Þ ASSEMBLYMAN WOOD. YEAH THANK
YOU TO THE AUTHOR, TRULY, THIS
IS OUT OF THE BOX OR OUTSIDE THE
BOX. AND I APPRECIATE APPRECIATE
YOUR YOUR THOUGHTS HERE, DO WE
HAVE ANY IDEA OF WHAT A WHAT THE
SIZE OF A BOND WOULD LOOK LIKE
OR, OR HOW THAT WOULD BE
DETERMINED, I DON'T THINK AN
AMOUNT THAT IS SOME OF THE
CONCERNS. AND I DO WANT TO
ACKNOWLEDGE THE FAIR PLAN
CONCERNS THAT I ALSO MENTIONED
IN MY TESTIMONY IN TERMS OF THE
MECHANISM AND ENSURING THAT,
WHATEVER IS CREATED AS TO THE
CONCERNS OF OUR COLLEAGUE JUST
SPOKE, ARE ADDRESS. AND SO,
THAT'S NOT A SPECIFIC THAT I
THINK, I CAN TELL YOU FOR SURE
WHAT THAT WOULD BE. BUT THE
INTENT IS AS, OUR, OUR COLLEAGUE
JUST MENTIONED, IS TO TRY TO
INSTEAD OF A VERY IMMEDIATE
SHORT TERM EXPOSURE, EXTEND THAT
EXPOSURE OVER MORE YEARS, ALL
AGAIN, ON INSURERS, NOT ON
POLICYHOLDERS. YEAH. AND THAT'S
AND SO I CAN IMAGINE THAT
INSURERS WOULD BE MUCH HAPPIER
TO KNOW THAT THEY MIGHT HAVE
POTENTIALLY UP TO TEN YEARS,
EVEN WITH INTEREST, TO BE ABLE
TO, TO TAKE CARE OF A LOSS. SO,
SO VERY MUCH APPRECIATE THAT.
BUT I JUST WANT TO POINT OUT TO
YOU AND THANK YOU FOR MR.
DUNOYER FOR POINTING THIS OUT,
THAT EVEN WITH THE REFORMS AND
CHANGES THAT ARE COMING, IT'S
GOING TO BE 2 TO 5, 2 TO 3 YEARS
BEFORE WE SEE, A LOT OF THIS
REALLY HAVE SIGNIFICANT EFFECT.
WE'RE GOING TO SEE PIECES OF
THIS THAT WILL GRADUALLY AFFECT
THE MARKET FOR INSURANCE. BUT
ANYTHING WE CAN DO TO CONTINUE
TO PUSH ON ON THE INSURANCE
COMMISSIONER'S OFFICE TO
EXPEDITE OUT THESE THINGS AS
QUICKLY AS POSSIBLE IS WHAT THE
IS GOING TO HELP WITH THE RELIEF
THAT CONSUMERS DESPERATELY NEED
RIGHT NOW. SO THIS IS A CRISIS.
WE NEED THAT AGENCY TO ACT LIKE
IT'S A CRISIS. SO I WITH THAT,
I'M HAPPY TO SUPPORT YOUR BILL
TODAY. THANK YOU. THANK YOU.
ASSEMBLY MEMBER, WOULD YOU LIKE
TO CLOSE, THANK YOU ALL. THIS
COMMITTEE AND CERTAINLY THE
CHAIR AND THE STAFF ARE REALLY
DILIGENT ABOUT TRYING TO HELP
SOLVE THIS CRISIS. THIS IS ONLY
A TOOL THAT HOPEFULLY, IN THE
ABSENCE OF THE NEXT COUPLE OF
YEARS OF WHAT WE ALL EXPECT
SHOULD HAPPEN, WILL BE AVAILABLE
TO HELP WITH THIS CONCERN. AND
WITH THAT, I RESPECTFULLY ASK
FOR YOUR VOTE. THANK YOU.
SECRETARY, PLEASE CALL THE ROLL
FILE. ITEM NUMBER ONE AB 2996.
ALVAREZ. MOTION IS DUE. PASS TO
APPROPRIATIONS. CALDERON. I
CALDERON I CHEN. CHEN I ALVAREZ
I ALVAREZ I BAUER-KAHAN
BAUER-KAHAN I BERMAN. GIBSON.
GIBSON I JONES-SAWYER.
JONES-SAWYER I LOWENTHAL.
LOWENTHAL I ORTEGA. ORTEGA I JO.
PATTERSON. JO. PATTERSON I
PETRIE-NORRIS. RUBIO I. RUBIO. I
VALENCIA. VALENCIA. I WALLACE.
WOOD. WOOD I. THANK YOU. YEAH.
THE AMOUNT IS I MEAN IT COULD BE
A BOND OF ANY IT DEPENDS ON AND
IT ALSO AND IT ALSO HOW MUCH
EXPOSURE DO YOU HAVE. AND DO YOU
WANT TO COVER USING THIS RIGHT
TOOL. RIGHT. SO IT'S A BILLION
AND A HALF WAS WHAT THEY RAISED
FOR THE WORKERS COMP. SO BUT
YOU'RE RIGHT I MEAN WOULDN'T
THEY WOULDN'T THEY ISSUE WITH
THE ISSUE OF ONE BOND THAT'S
CUMULATIVE OF EVERYBODY OR ISSUE
BONDS FOR THE TERRIERS. YEAH.
THEY JUST ISSUED FOR THE FAIR OR
THE PLAN ITSELF. SO THEY ONLY
NEED 5 MILLION, 4 MILLION. BUT
SHE NORMALLY JUST TELL THE I
FIND OUT WHAT YOU AND THEY'RE
LIKE HEY WE CAN EASILY DO
SOMETHING 2 MILLION. IF THEY
CAN'T DO IT, YOU NEED 2 MILLION.
THE INSURANCE COMMITTEE IS
ADJOURNED