OFFICE OF FISCAL ANALYSIS Legislative Office Building, Room 5200 Hartford, CT 06106 (860) 240-0200 http://www.cga.ct.gov/ofa sSB-482 AN ACT ESTABLISHING THE FINTECH REGULATORY SANDBOX PROGRAM AND THE INSURTECH REGULATORY SANDBOX INITIATIVE. Primary Analyst: LG 4/25/22 Contributing Analyst(s): ME, MP OFA Fiscal Note State Impact: Agency Affected Fund-Effect FY 23 $ FY 24 $ Banking Dept. BF - Cost 180,163 to 200,163 180,163 to 200,163 Banking Dept. BF - Revenue Loss See Below See Below Banking Dept. BF - Revenue Gain See Below See Below Resources of the General Fund GF - Potential Revenue Gain See Below See Below Department of Emergency Services and Public Protection Applicant Fingerprint Card Submission Account - Potential Revenue Gain See Below See Below Insurance Dept. IF - Cost 201,000 to 221,000 201,000 to 221,000 Note: GF=General Fund; IF=Insurance Fund; BF=Banking Fund Municipal Impact: None Explanation This bill establishes a Fintech Regulatory Sandbox program and requires the Insurance Commissioner, in consultation with the CTNext board of directors, to establish an Insurtech Regulatory Sandbox initiative. The bill is anticipated to result in costs, revenue gain, and revenue loss to the Department of Banking (DOB), potential revenue gain to the Department of Emergency Services and Public Protection 2022SB-00482-R000622-FN.DOCX Page 2 of 3 (DESPP) and the General Fund, and costs to the Insurance Department (DOI). The bill also establishes an 11-member Innovation Council within the DOB to oversee the Fintech program. The fiscal impact of the bill is described by section below. Section 1 establishes the Fintech Regulatory Sandbox program. While licensing fees may vary by type and agency, DOB consumer credit licensing fees are approximately $1,000 annually. To the extent fewer licenses are issued as a result of this program, there is a potential revenue loss to the DOB. This section also establishes an Innovation Council and requires them to prescribe the application process and amount of the application fee for the Fintech program. The bill also permits the council to impose a participation fee, and other additional fees, on each applicant approved for the program. This results in a potential revenue gain to DOB, which is dependent on the fee amounts and number of fees. The Innovation Council may also require certain applicants and their employees involved with the innovative products to complete a criminal history records check resulting in a potential revenue gain to the General Fund and the Applicant Fingerprint Card Submission Account. The DESPP conducts state background checks for $75 per person and to the extent additional background checks are requested there is a potential revenue gain to the state. State background checks require fingerprinting, which DESPP conducts for $15 per person resulting in a potential revenue gain to the Applicant Fingerprint Card Submission Account 1 . Members of the Innovation Council are required to serve without compensation but will be reimbursed for necessary expenses incurred when performing their duties within available funds. As the bill allows for expenses without detailing what constitutes an eligible expense, there may be associated costs that are uncertain at this time. The DOB 1 Funds in the Applicant Fingerprint Card Submission Account are used for IT support and maintenance for the fingerprinting systems. 2022SB-00482-R000622-FN.DOCX Page 3 of 3 may also incur costs of up to $20,000 in Other Expenses for marketing and communication which will be dependent on the methods the Innovation Council uses to publicize the program. It is anticipated that DOB will require one Staff Attorney 2 position to provide support for the Fintech Regulatory Sandbox program as DOB currently does not have the expertise to provide oversight required by this bill. The salary range for a Staff Attorney 2 is $90,203 - $115,434. Based on the starting salary and fringe benefit rate charged to the Banking Fund 2 , this position has an annualized cost of approximately $180,163 to the Banking Fund in FY 23 and FY 24. Section 2, which requires the Insurance Department to establish an Insurtech Regulatory Sandbox, results in an annual cost of between $201,000 and $221,000 to the Insurance Fund in FY 23 and FY 24. It is anticipated that the Insurance Department will need to hire a new Insurance Program Manager beginning July 1, 2023, to establish and oversee the initiative at annual cost of $100,585 for salary and $100,313 for fringe benefits 2 . The Insurance Department may also incur costs of up to $20,000 for marketing and communications to the extent the agency elects to publicize the program. The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to the number of foregone licenses, the program fees collected, the number of background checks, and changes to employee wage and benefit costs. Any costs for marketing and communications are anticipated to decrease in the out years after the programs are well established. Sources: Core-CT Financial Accounting System 2 The fringe benefit costs for employees funded out of other appropriated funds are budgeted within the fringe benefit account of those funds, as opposed to the fringe benefit accounts within the Office of the State Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes for other appropriated fund employees is 99.73% of payroll in FY 23.