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Governor Arnold Schwarzenegger signed AB 1708 by Assemblyman Mike Villines and AB 1837 by Assemblyman Ted Gaines into law this past week as reported earlier.
AB 1708, sponsored by the California Department of Insurance, increases the minimum capital and surplus requirement for surplus lines companies from $15 million to $45 million. The bill requires $25 million of this amount to be held in forms that meet the requirements of Department of Insurance statutes relative to the general investment law. AB 1708 authorizes the balance of the required minimum capital to be held in instruments that are allowable under either the General Investments Law or the Excess Funds Investments Law. The bill requires, for a surplus lines carrier on the Department of Insurance's LESLI list which does not, as of January 1, 2011, meet the capital and surplus requirements imposed by this act, to have at least $30 million of capital and surplus as of December 31, 2011, and at least $45 million of capital and surplus by December 31, 2013. Lastly, AB 1708 provides for a staged transition to the new capital and surplus requirements by December 31, 2013.
AB 1837, sponsored by the Pacific Association of Domestic Insurance Companies, permits a California domestic insurer to provide designated administrative services to an affiliated non-admitted insurer which is approved by the California Department of Insurance for accepting surplus lines placements in California. Administrative services include computer operations, clerical and administrative staffing support, human resources, claims adjusting and investing services.