September 18, 2012
California’s Insurance Holding Company System Regulatory Act (Act) has been updated under legislation signed by Governor Brown. Senate Bill 1448 (Chapter 282) updates California law by incorporating changes contained in the NAIC Insurance Holding Company Systems Model Law.
A principal provision in the bill requires the controlling person of the holding company system to disclose an enterprise risk. Enterprise risk is any situation involving one or more affiliates of an insurer that, if not quickly corrected, would adversely affect the financial condition of the insurer. The bill also requires any controlling person of a domestic insurer seeking to divest its controlling interest to file a confidential notice with the Commissioner of the proposed divestiture. The Commissioner would then determine those instances in which an insurer under those circumstances would be required to obtain approval for the transaction. Furthermore, the bill requires a registration statement to specify that the insurer's board of directors is responsible for overseeing corporate governance and internal controls, and that the insurer's officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal controls.
The Legislation was sponsored by the Insurance Commissioner and supported by the Association of California Insurance Companies. It was unanimously passed by both houses of the Legislature. A copy of the Insurance Commissioner’s Press Release on the signature of this bill can be found HERE.