CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION Assembly Bill No. 1460Introduced by Assembly Member DababnehFebruary 17, 2017 An act to amend Sections 1734 and 1734.5 of the Insurance Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGESTAB 1460, as introduced, Dababneh. Licensees: fiduciary funds.Existing law requires that all funds received by any person acting as a licensed insurance producer, an administrator, a surplus line broker, or a bail licensee, as premium or return premium on or under any policy of insurance or undertaking of bail, are received and held by that person in his or her fiduciary capacity. Existing law requires a person who holds one of the above-described licenses who receives fiduciary funds to maintain those funds, as provided, including, but not limited to, maintaining those funds on California business, at all times in a trustee bank account or depository in California, separate from any other account or depository, in specified amounts.This bill would delete the reference to the depository being in California and would instead expand the depository to include a bank or savings and loan association licensed by any state government within the United States or by the United States government.Existing law authorizes an above-described licensee to hold fiduciary funds in bonds, certificates, obligations, certificates of deposit, and repurchase agreements. Existing law requires a bank, as defined, or savings association, as defined, to maintain evidence of those fiduciary funds on California business, in a custodian or trust account in California, separate from any other funds, in specified amounts.This bill would delete the reference to the fiduciary funds being in a custodian or trust account in California and the definitions for a bank and a savings association and would require a bank or savings association licensed by any state government within the United States or by the United States government to maintain evidence of these funds in custodian or trust accounts both in and outside of California.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO Bill TextThe people of the State of California do enact as follows:SECTION 1. Section 1734 of the Insurance Code is amended to read:1734. This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as defined in Section 1733, are received by such that person, he shall: or she shall do any of the following:(a) Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto, or thereto.(b) Maintain such those fiduciary funds on California business at all times in a trustee bank account or depository in California a bank or savings and loan association licensed by any state government within the United States or by the United States government, separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid to the persons entitled thereto or, at their direction or pursuant to written contract, for the account of such those persons. As used in this section, trustee bank account or depository includes but is not limited to depository, includes, but is not limited to, a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such that person may commingle with such those fiduciary funds in such the account or depository such those additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return commissions commissions, or for such those contingencies as may arise in his or her business of receiving and transmitting premium or return premium funds, or funds.(c) Maintain such those fiduciary funds pursuant to Section 1734.5.SEC. 2. Section 1734.5 of the Insurance Code is amended to read:1734.5. (a) (1) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734, the funds shall be maintained in any of the following:(A) United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest.(B) Certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or States or by the United States government.(C) Repurchase agreements collateralized by securities issued by the United States government.(D) Either of the following:(i) Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations.(ii) Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district district, or by a department, board, agency, or authority thereof.(2) The bonds and obligations described in subparagraph (D) of paragraph (1) shall either have maturities of not more than one year or afford the holder of the obligation the unilateral right to redeem the obligation from its issuer within one year from date of purchase at an amount equal to to, or greater than than, its par value, and the bonds and obligations shall be required to be rated at least Aa1, MIG-1/VMIG-1, or Prime-1 by Moodys Investor Service, Inc., or AA, SP-1, or A-1 by Standard and Poors Corporation.(3) For the fiduciary funds maintained as provided in paragraph (1), the bonds, certificates, obligations, certificates of deposit, and repurchase agreements shall be valued on the basis of their acquisition cost.(b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.(c) Evidence of the funds shall be maintained on California business by a bank, as defined in Section 102 of the Financial Code, or a savings association, as defined in Section 143 or 5102 of the Financial Code, in a custodian or trust account in California, by a bank or a savings association licensed by any state government within the United States or by the United States government, in a custodian or trust account, separate from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the person may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies that may arise in his or her business of receiving and transmitting premium or return premium funds.(d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, parties shall not include the commissioner.(e) Investment losses to the principal of fiduciary funds maintained pursuant to this section are the responsibility of the person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and any obligation to insurers or other persons entitled to the fiduciary funds shall in no way be diminished due to any loss in the value to the principal of the fiduciary funds held pursuant to this section.
CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION Assembly Bill No. 1460Introduced by Assembly Member DababnehFebruary 17, 2017 An act to amend Sections 1734 and 1734.5 of the Insurance Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGESTAB 1460, as introduced, Dababneh. Licensees: fiduciary funds.Existing law requires that all funds received by any person acting as a licensed insurance producer, an administrator, a surplus line broker, or a bail licensee, as premium or return premium on or under any policy of insurance or undertaking of bail, are received and held by that person in his or her fiduciary capacity. Existing law requires a person who holds one of the above-described licenses who receives fiduciary funds to maintain those funds, as provided, including, but not limited to, maintaining those funds on California business, at all times in a trustee bank account or depository in California, separate from any other account or depository, in specified amounts.This bill would delete the reference to the depository being in California and would instead expand the depository to include a bank or savings and loan association licensed by any state government within the United States or by the United States government.Existing law authorizes an above-described licensee to hold fiduciary funds in bonds, certificates, obligations, certificates of deposit, and repurchase agreements. Existing law requires a bank, as defined, or savings association, as defined, to maintain evidence of those fiduciary funds on California business, in a custodian or trust account in California, separate from any other funds, in specified amounts.This bill would delete the reference to the fiduciary funds being in a custodian or trust account in California and the definitions for a bank and a savings association and would require a bank or savings association licensed by any state government within the United States or by the United States government to maintain evidence of these funds in custodian or trust accounts both in and outside of California.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO
CALIFORNIA LEGISLATURE 20172018 REGULAR SESSION
Assembly Bill No. 1460
Introduced by Assembly Member DababnehFebruary 17, 2017
Introduced by Assembly Member Dababneh
February 17, 2017
An act to amend Sections 1734 and 1734.5 of the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
## LEGISLATIVE COUNSEL'S DIGEST
AB 1460, as introduced, Dababneh. Licensees: fiduciary funds.
Existing law requires that all funds received by any person acting as a licensed insurance producer, an administrator, a surplus line broker, or a bail licensee, as premium or return premium on or under any policy of insurance or undertaking of bail, are received and held by that person in his or her fiduciary capacity. Existing law requires a person who holds one of the above-described licenses who receives fiduciary funds to maintain those funds, as provided, including, but not limited to, maintaining those funds on California business, at all times in a trustee bank account or depository in California, separate from any other account or depository, in specified amounts.This bill would delete the reference to the depository being in California and would instead expand the depository to include a bank or savings and loan association licensed by any state government within the United States or by the United States government.Existing law authorizes an above-described licensee to hold fiduciary funds in bonds, certificates, obligations, certificates of deposit, and repurchase agreements. Existing law requires a bank, as defined, or savings association, as defined, to maintain evidence of those fiduciary funds on California business, in a custodian or trust account in California, separate from any other funds, in specified amounts.This bill would delete the reference to the fiduciary funds being in a custodian or trust account in California and the definitions for a bank and a savings association and would require a bank or savings association licensed by any state government within the United States or by the United States government to maintain evidence of these funds in custodian or trust accounts both in and outside of California.
Existing law requires that all funds received by any person acting as a licensed insurance producer, an administrator, a surplus line broker, or a bail licensee, as premium or return premium on or under any policy of insurance or undertaking of bail, are received and held by that person in his or her fiduciary capacity. Existing law requires a person who holds one of the above-described licenses who receives fiduciary funds to maintain those funds, as provided, including, but not limited to, maintaining those funds on California business, at all times in a trustee bank account or depository in California, separate from any other account or depository, in specified amounts.
This bill would delete the reference to the depository being in California and would instead expand the depository to include a bank or savings and loan association licensed by any state government within the United States or by the United States government.
Existing law authorizes an above-described licensee to hold fiduciary funds in bonds, certificates, obligations, certificates of deposit, and repurchase agreements. Existing law requires a bank, as defined, or savings association, as defined, to maintain evidence of those fiduciary funds on California business, in a custodian or trust account in California, separate from any other funds, in specified amounts.
This bill would delete the reference to the fiduciary funds being in a custodian or trust account in California and the definitions for a bank and a savings association and would require a bank or savings association licensed by any state government within the United States or by the United States government to maintain evidence of these funds in custodian or trust accounts both in and outside of California.
## Digest Key
## Bill Text
The people of the State of California do enact as follows:SECTION 1. Section 1734 of the Insurance Code is amended to read:1734. This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as defined in Section 1733, are received by such that person, he shall: or she shall do any of the following:(a) Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto, or thereto.(b) Maintain such those fiduciary funds on California business at all times in a trustee bank account or depository in California a bank or savings and loan association licensed by any state government within the United States or by the United States government, separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid to the persons entitled thereto or, at their direction or pursuant to written contract, for the account of such those persons. As used in this section, trustee bank account or depository includes but is not limited to depository, includes, but is not limited to, a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such that person may commingle with such those fiduciary funds in such the account or depository such those additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return commissions commissions, or for such those contingencies as may arise in his or her business of receiving and transmitting premium or return premium funds, or funds.(c) Maintain such those fiduciary funds pursuant to Section 1734.5.SEC. 2. Section 1734.5 of the Insurance Code is amended to read:1734.5. (a) (1) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734, the funds shall be maintained in any of the following:(A) United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest.(B) Certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or States or by the United States government.(C) Repurchase agreements collateralized by securities issued by the United States government.(D) Either of the following:(i) Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations.(ii) Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district district, or by a department, board, agency, or authority thereof.(2) The bonds and obligations described in subparagraph (D) of paragraph (1) shall either have maturities of not more than one year or afford the holder of the obligation the unilateral right to redeem the obligation from its issuer within one year from date of purchase at an amount equal to to, or greater than than, its par value, and the bonds and obligations shall be required to be rated at least Aa1, MIG-1/VMIG-1, or Prime-1 by Moodys Investor Service, Inc., or AA, SP-1, or A-1 by Standard and Poors Corporation.(3) For the fiduciary funds maintained as provided in paragraph (1), the bonds, certificates, obligations, certificates of deposit, and repurchase agreements shall be valued on the basis of their acquisition cost.(b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.(c) Evidence of the funds shall be maintained on California business by a bank, as defined in Section 102 of the Financial Code, or a savings association, as defined in Section 143 or 5102 of the Financial Code, in a custodian or trust account in California, by a bank or a savings association licensed by any state government within the United States or by the United States government, in a custodian or trust account, separate from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the person may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies that may arise in his or her business of receiving and transmitting premium or return premium funds.(d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, parties shall not include the commissioner.(e) Investment losses to the principal of fiduciary funds maintained pursuant to this section are the responsibility of the person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and any obligation to insurers or other persons entitled to the fiduciary funds shall in no way be diminished due to any loss in the value to the principal of the fiduciary funds held pursuant to this section.
The people of the State of California do enact as follows:
## The people of the State of California do enact as follows:
SECTION 1. Section 1734 of the Insurance Code is amended to read:1734. This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as defined in Section 1733, are received by such that person, he shall: or she shall do any of the following:(a) Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto, or thereto.(b) Maintain such those fiduciary funds on California business at all times in a trustee bank account or depository in California a bank or savings and loan association licensed by any state government within the United States or by the United States government, separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid to the persons entitled thereto or, at their direction or pursuant to written contract, for the account of such those persons. As used in this section, trustee bank account or depository includes but is not limited to depository, includes, but is not limited to, a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such that person may commingle with such those fiduciary funds in such the account or depository such those additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return commissions commissions, or for such those contingencies as may arise in his or her business of receiving and transmitting premium or return premium funds, or funds.(c) Maintain such those fiduciary funds pursuant to Section 1734.5.
SECTION 1. Section 1734 of the Insurance Code is amended to read:
### SECTION 1.
1734. This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as defined in Section 1733, are received by such that person, he shall: or she shall do any of the following:(a) Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto, or thereto.(b) Maintain such those fiduciary funds on California business at all times in a trustee bank account or depository in California a bank or savings and loan association licensed by any state government within the United States or by the United States government, separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid to the persons entitled thereto or, at their direction or pursuant to written contract, for the account of such those persons. As used in this section, trustee bank account or depository includes but is not limited to depository, includes, but is not limited to, a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such that person may commingle with such those fiduciary funds in such the account or depository such those additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return commissions commissions, or for such those contingencies as may arise in his or her business of receiving and transmitting premium or return premium funds, or funds.(c) Maintain such those fiduciary funds pursuant to Section 1734.5.
1734. This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as defined in Section 1733, are received by such that person, he shall: or she shall do any of the following:(a) Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto, or thereto.(b) Maintain such those fiduciary funds on California business at all times in a trustee bank account or depository in California a bank or savings and loan association licensed by any state government within the United States or by the United States government, separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid to the persons entitled thereto or, at their direction or pursuant to written contract, for the account of such those persons. As used in this section, trustee bank account or depository includes but is not limited to depository, includes, but is not limited to, a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such that person may commingle with such those fiduciary funds in such the account or depository such those additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return commissions commissions, or for such those contingencies as may arise in his or her business of receiving and transmitting premium or return premium funds, or funds.(c) Maintain such those fiduciary funds pursuant to Section 1734.5.
1734. This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as defined in Section 1733, are received by such that person, he shall: or she shall do any of the following:(a) Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto, or thereto.(b) Maintain such those fiduciary funds on California business at all times in a trustee bank account or depository in California a bank or savings and loan association licensed by any state government within the United States or by the United States government, separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid to the persons entitled thereto or, at their direction or pursuant to written contract, for the account of such those persons. As used in this section, trustee bank account or depository includes but is not limited to depository, includes, but is not limited to, a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such that person may commingle with such those fiduciary funds in such the account or depository such those additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return commissions commissions, or for such those contingencies as may arise in his or her business of receiving and transmitting premium or return premium funds, or funds.(c) Maintain such those fiduciary funds pursuant to Section 1734.5.
1734. This section applies to any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733. If fiduciary funds, as defined in Section 1733, are received by such that person, he shall: or she shall do any of the following:
(a) Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto, or thereto.
(b) Maintain such those fiduciary funds on California business at all times in a trustee bank account or depository in California a bank or savings and loan association licensed by any state government within the United States or by the United States government, separate from any other account or depository, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid to the persons entitled thereto or, at their direction or pursuant to written contract, for the account of such those persons. As used in this section, trustee bank account or depository includes but is not limited to depository, includes, but is not limited to, a checking account, demand account, or savings account, each of which shall be designated as a trust account. However, such that person may commingle with such those fiduciary funds in such the account or depository such those additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return commissions commissions, or for such those contingencies as may arise in his or her business of receiving and transmitting premium or return premium funds, or funds.
(c) Maintain such those fiduciary funds pursuant to Section 1734.5.
SEC. 2. Section 1734.5 of the Insurance Code is amended to read:1734.5. (a) (1) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734, the funds shall be maintained in any of the following:(A) United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest.(B) Certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or States or by the United States government.(C) Repurchase agreements collateralized by securities issued by the United States government.(D) Either of the following:(i) Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations.(ii) Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district district, or by a department, board, agency, or authority thereof.(2) The bonds and obligations described in subparagraph (D) of paragraph (1) shall either have maturities of not more than one year or afford the holder of the obligation the unilateral right to redeem the obligation from its issuer within one year from date of purchase at an amount equal to to, or greater than than, its par value, and the bonds and obligations shall be required to be rated at least Aa1, MIG-1/VMIG-1, or Prime-1 by Moodys Investor Service, Inc., or AA, SP-1, or A-1 by Standard and Poors Corporation.(3) For the fiduciary funds maintained as provided in paragraph (1), the bonds, certificates, obligations, certificates of deposit, and repurchase agreements shall be valued on the basis of their acquisition cost.(b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.(c) Evidence of the funds shall be maintained on California business by a bank, as defined in Section 102 of the Financial Code, or a savings association, as defined in Section 143 or 5102 of the Financial Code, in a custodian or trust account in California, by a bank or a savings association licensed by any state government within the United States or by the United States government, in a custodian or trust account, separate from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the person may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies that may arise in his or her business of receiving and transmitting premium or return premium funds.(d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, parties shall not include the commissioner.(e) Investment losses to the principal of fiduciary funds maintained pursuant to this section are the responsibility of the person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and any obligation to insurers or other persons entitled to the fiduciary funds shall in no way be diminished due to any loss in the value to the principal of the fiduciary funds held pursuant to this section.
SEC. 2. Section 1734.5 of the Insurance Code is amended to read:
### SEC. 2.
1734.5. (a) (1) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734, the funds shall be maintained in any of the following:(A) United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest.(B) Certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or States or by the United States government.(C) Repurchase agreements collateralized by securities issued by the United States government.(D) Either of the following:(i) Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations.(ii) Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district district, or by a department, board, agency, or authority thereof.(2) The bonds and obligations described in subparagraph (D) of paragraph (1) shall either have maturities of not more than one year or afford the holder of the obligation the unilateral right to redeem the obligation from its issuer within one year from date of purchase at an amount equal to to, or greater than than, its par value, and the bonds and obligations shall be required to be rated at least Aa1, MIG-1/VMIG-1, or Prime-1 by Moodys Investor Service, Inc., or AA, SP-1, or A-1 by Standard and Poors Corporation.(3) For the fiduciary funds maintained as provided in paragraph (1), the bonds, certificates, obligations, certificates of deposit, and repurchase agreements shall be valued on the basis of their acquisition cost.(b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.(c) Evidence of the funds shall be maintained on California business by a bank, as defined in Section 102 of the Financial Code, or a savings association, as defined in Section 143 or 5102 of the Financial Code, in a custodian or trust account in California, by a bank or a savings association licensed by any state government within the United States or by the United States government, in a custodian or trust account, separate from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the person may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies that may arise in his or her business of receiving and transmitting premium or return premium funds.(d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, parties shall not include the commissioner.(e) Investment losses to the principal of fiduciary funds maintained pursuant to this section are the responsibility of the person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and any obligation to insurers or other persons entitled to the fiduciary funds shall in no way be diminished due to any loss in the value to the principal of the fiduciary funds held pursuant to this section.
1734.5. (a) (1) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734, the funds shall be maintained in any of the following:(A) United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest.(B) Certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or States or by the United States government.(C) Repurchase agreements collateralized by securities issued by the United States government.(D) Either of the following:(i) Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations.(ii) Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district district, or by a department, board, agency, or authority thereof.(2) The bonds and obligations described in subparagraph (D) of paragraph (1) shall either have maturities of not more than one year or afford the holder of the obligation the unilateral right to redeem the obligation from its issuer within one year from date of purchase at an amount equal to to, or greater than than, its par value, and the bonds and obligations shall be required to be rated at least Aa1, MIG-1/VMIG-1, or Prime-1 by Moodys Investor Service, Inc., or AA, SP-1, or A-1 by Standard and Poors Corporation.(3) For the fiduciary funds maintained as provided in paragraph (1), the bonds, certificates, obligations, certificates of deposit, and repurchase agreements shall be valued on the basis of their acquisition cost.(b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.(c) Evidence of the funds shall be maintained on California business by a bank, as defined in Section 102 of the Financial Code, or a savings association, as defined in Section 143 or 5102 of the Financial Code, in a custodian or trust account in California, by a bank or a savings association licensed by any state government within the United States or by the United States government, in a custodian or trust account, separate from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the person may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies that may arise in his or her business of receiving and transmitting premium or return premium funds.(d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, parties shall not include the commissioner.(e) Investment losses to the principal of fiduciary funds maintained pursuant to this section are the responsibility of the person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and any obligation to insurers or other persons entitled to the fiduciary funds shall in no way be diminished due to any loss in the value to the principal of the fiduciary funds held pursuant to this section.
1734.5. (a) (1) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734, the funds shall be maintained in any of the following:(A) United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest.(B) Certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or States or by the United States government.(C) Repurchase agreements collateralized by securities issued by the United States government.(D) Either of the following:(i) Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations.(ii) Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district district, or by a department, board, agency, or authority thereof.(2) The bonds and obligations described in subparagraph (D) of paragraph (1) shall either have maturities of not more than one year or afford the holder of the obligation the unilateral right to redeem the obligation from its issuer within one year from date of purchase at an amount equal to to, or greater than than, its par value, and the bonds and obligations shall be required to be rated at least Aa1, MIG-1/VMIG-1, or Prime-1 by Moodys Investor Service, Inc., or AA, SP-1, or A-1 by Standard and Poors Corporation.(3) For the fiduciary funds maintained as provided in paragraph (1), the bonds, certificates, obligations, certificates of deposit, and repurchase agreements shall be valued on the basis of their acquisition cost.(b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.(c) Evidence of the funds shall be maintained on California business by a bank, as defined in Section 102 of the Financial Code, or a savings association, as defined in Section 143 or 5102 of the Financial Code, in a custodian or trust account in California, by a bank or a savings association licensed by any state government within the United States or by the United States government, in a custodian or trust account, separate from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the person may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies that may arise in his or her business of receiving and transmitting premium or return premium funds.(d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, parties shall not include the commissioner.(e) Investment losses to the principal of fiduciary funds maintained pursuant to this section are the responsibility of the person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and any obligation to insurers or other persons entitled to the fiduciary funds shall in no way be diminished due to any loss in the value to the principal of the fiduciary funds held pursuant to this section.
1734.5. (a) (1) If fiduciary funds, as defined in Section 1733, are received by any person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and the funds are not remitted, or maintained pursuant to subdivisions (a) and (b) of Section 1734, the funds shall be maintained in any of the following:
(A) United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest.
(B) Certificates of deposit of banks or savings and loan associations licensed by any state government within the United States, or States or by the United States government.
(C) Repurchase agreements collateralized by securities issued by the United States government.
(D) Either of the following:
(i) Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations.
(ii) Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district district, or by a department, board, agency, or authority thereof.
(2) The bonds and obligations described in subparagraph (D) of paragraph (1) shall either have maturities of not more than one year or afford the holder of the obligation the unilateral right to redeem the obligation from its issuer within one year from date of purchase at an amount equal to to, or greater than than, its par value, and the bonds and obligations shall be required to be rated at least Aa1, MIG-1/VMIG-1, or Prime-1 by Moodys Investor Service, Inc., or AA, SP-1, or A-1 by Standard and Poors Corporation.
(3) For the fiduciary funds maintained as provided in paragraph (1), the bonds, certificates, obligations, certificates of deposit, and repurchase agreements shall be valued on the basis of their acquisition cost.
(b) As a condition to maintaining the fiduciary funds pursuant to this section, a written agreement shall be obtained from each and every insurer or person entitled thereto authorizing the maintenance and the retention of any earnings accruing on the funds.
(c) Evidence of the funds shall be maintained on California business by a bank, as defined in Section 102 of the Financial Code, or a savings association, as defined in Section 143 or 5102 of the Financial Code, in a custodian or trust account in California, by a bank or a savings association licensed by any state government within the United States or by the United States government, in a custodian or trust account, separate from any other funds, in an amount at least equal to the premiums and return premiums, net of commissions received by him or her and unpaid to the persons entitled thereto, or, at their discretion or pursuant to a written contract, for the account of these persons. However, the person may commingle with the fiduciary funds any additional funds as he or she may deem prudent for the purpose of advancing premiums, establishing reserves for the paying of return premiums, or for any contingencies that may arise in his or her business of receiving and transmitting premium or return premium funds.
(d) The commissioner shall not have jurisdiction over any disputes arising between parties concerning the maintenance of fiduciary funds pursuant to this section. However, this subdivision shall not otherwise affect the authority granted to the commissioner over fiduciary funds by other provisions of this code, or regulations adopted pursuant thereto. As used in this subdivision, parties shall not include the commissioner.
(e) Investment losses to the principal of fiduciary funds maintained pursuant to this section are the responsibility of the person licensed, whether under a permanent license, restricted license, temporary license, or certificate of convenience, to act in any of the capacities specified in Section 1733, and any obligation to insurers or other persons entitled to the fiduciary funds shall in no way be diminished due to any loss in the value to the principal of the fiduciary funds held pursuant to this section.