California Insurance Guarantee Association.
The passage of AB 2154 is expected to significantly affect state insurance laws by expanding CIGA's authority to levy assessments on member insurers. The adjustments will enable CIGA to respond more effectively to financial crises among insurers, thereby protecting policyholders more efficiently. The amendments will necessitate increased communication with legislative committees and enhance fiscal oversight of issued bonds, impacting how insurance claims are processed in California during periods of insurer insolvency.
Assembly Bill 2154, sponsored by Cooley, addresses the operations of the California Insurance Guarantee Association (CIGA) which assists in managing claims against insolvent insurers. The bill modifies existing laws to broaden CIGA's powers in the wake of insolvencies, allowing them to issue bonds not only for workers' compensation claims but also for homeowners, automobile, and other insurance categories. The intention behind these amendments is to enhance the financial stability of CIGA by enabling quicker access to funds needed to settle claims, which in turn supports policyholders impacted by the insolvency of insurers.
The sentiment surrounding AB 2154 is generally supportive among insurance regulators and consumer advocacy groups, who recognize the necessity for a robust mechanism to handle claims from insolvent insurers. However, some concerns have been raised regarding the potential for increased surcharges on policyholders due to bond assessments, which could be interpreted as a tax increase on insurance premiums. While the bill seeks stability within the insurance market, it does share the common concern of raising the overall costs for consumers.
A notable contention surrounding AB 2154 is its provision for issuing bonds, particularly linked to the levies placed on member insurers. Critics argue that this could lead to higher insurance costs for consumers if insurers pass these expenses onto policyholders. Additionally, while the bill aims to streamline claims processing, there is concern regarding the adequacy of CIGA's management and transparency in how funds are utilized from bond proceeds, especially in the aftermath of significant disasters or other unforeseen events.