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Gov. Arnold Schwarzenegger signed two important consumer protection bills this week supported by IBA West.
The first bill will protect commercial clients by raising the minimum capital surplus requirements of non-admitted carriers. The second bill will protect personal lines clients by revising the insurance disclosure form which will help homeowners in reviewing the adequacy of their insurance coverages, particularly in the event of a catastrophe such as a wildfire.
"IBA West shepherded these bills through the legislative process," said IBA West Legislative Advocate John Norwood." We were the only producer trade association that showed up every day at the Capitol to make sure these two bills successfully found their way through the Legislature and eventually signed by the governor.”
Specifically, AB 1708 (Villines), sponsored by the California Department of Insurance, increases the minimum capital and surplus requirements for surplus lines companies from $15 million to $45 million.
The bill mandates $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 line 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.
“This bill is important because raising the minimum capital surplus requirements protect commercial clients that need coverage from non-admitted insurers where there no guarantee fund available as a backstop,” said Norwood said.
AB 2022 (Gaines), also sponsored by the Department, revises the homeowners insurance disclosure form required to be provided annually to homeowners. The bill shortens the disclosure form, makes it easier to read, and easier for the homeowner to review the adequacy of his or her coverage in anticipation a loss or a major catastrophe.
The Department of Insurance stressed the bill was needed because the disclosure notice, created in 1991, had become outdated and confusing. The length of the current disclosure form, its cumbersome charts, and the technical descriptions of coverage and responsibilities, fails to provide the readability necessary to effectively convey the important information to consumers.
Pursuant to AB 2022, the revised disclosure notice is easier to read, updates key terms in homeowners policies, emphasizes the avoidance of underinsurance, and describes the effect of a demand surge on construction costs. This information will help homeowners in reviewing the adequacy of their insurance coverages in the event of a catastrophe such as a wildfire.