AB 735

This bill makes various miscellaneous changes to the insurance laws, including

the following:

1. The bill requires every insurer, or insurance holding company system of

which the insurer is a member, to: a) maintain a risk management framework to

assist the insurer or insurance holding company system in identifying and managing

its material and relevant risks; and b) whenever there are significant changes to the

insurer's or insurance holding company system's risk profile, but at least annually,

conduct an "own risk and solvency assessment" (ORSA) consistent with the ORSA

Guidance Manual (guidance manual) developed and adopted by the National

Association of Insurance Commissioners. The bill defines an insurance holding

company system as two or more persons that are affiliates, at least one of which is

an insurer, and an ORSA as a confidential internal assessment of the insurer's or

insurance holding company system's material and relevant risks associated with the

insurer's or insurance holding company system's current business plan and of the

sufficiency of the capital resources to support those risks. Under the bill, the insurer

must file with the commissioner of insurance (commissioner) a report that is

prepared consistently with the guidance manual summarizing the insurer's ORSA

(summary report). In general, the report must be filed with the commissioner within

45 days after the insurer submits the summary report to its board of directors but

no more than once per year or within 45 days after the insurer submits the summary

report to the commissioner of the insurer's lead state.

An insurer is exempt from the requirements of maintaining a risk management

framework, conducting an ORSA, and filing a summary report if the insurer's annual

direct written premium and assumed premium from unaffiliated insurers is less

than $500,000,000 and, if the insurer is a member of an insurance holding company

system, the insurance holding company system of which the insurer is a member has

annual direct written premium and assumed premium from unaffiliated insurers of

less than $1,000,000,000. If the insurer's premium qualifies the insurer for

exemption but the premium of the insurance holding company system of which the

insurer is a member does not qualify the insurance holding company system for

exemption, the summary report must include every insurer in the insurance holding

company system. If the insurer does not qualify for exemption but the insurance

holding company system of which it is a member qualifies for exemption, only the

summary report applicable to the insurer is required.

The bill sets out detailed confidentiality requirements with respect to

documents, materials, and other information, including summary reports, that are

obtained or created by, or disclosed to, the commissioner as a result of the new risk

assessment requirements. Generally, the documents, materials, and other

information, including summary reports, are confidential and privileged and are not

subject to inspection, copying, subpoena, or discovery and are not admissible in