AB 420

This bill makes a number of miscellaneous changes to the insurance statutes,

including the following:

1. Under current law, the reserves that life insurance policies, annuities, and

pure endowment contracts must maintain are calculated according to a formula set

out in the statutes. Under the bill, policies and contracts must use a principle-based

valuation for reserves on and after the operative date of the valuation manual. The

"valuation manual" is defined in the bill as the manual of valuation instructions

adopted by the National Association of Insurance Commissioners (NAIC). The

"operative date of the valuation manual" is defined in the bill as the January 1 of the

first calendar year beginning after the first July 1 as of which three things have

occurred: 1) the valuation manual has been adopted by the NAIC by an affirmative

vote of the greater of at least 42 members or three-fourths of the members voting;

2) the standard valuation law has been enacted by states representing more than 75

percent of the direct premiums written as reported in the 2008 annual statements

for certain types of insurance; and 3) the standard valuation law has been enacted

by at least 42 of 55 specified jurisdictions. "Principle-based valuation" is defined in

the bill as a reserve valuation that uses one or more methods, or one or more

assumptions, determined by the insurer and that is required to comply with detailed

specifications and processes outlined in the bill. The bill also describes the

documents, materials, and other information related to the requirements for

principle-based valuation that are designated as confidential and specifies the

confidentiality requirements that apply with respect to those documents, materials,

and other information.

2. Under current law, health care providers that are subject to the health care

liability provisions of the statutes pay assessments for the injured patients and

families compensation fund, which pays any portion of a medical malpractice claim

that exceeds the policy limits of the health care liability insurance carried by those

health care providers. The assessments are set by the commissioner of insurance

(commissioner) by rule, after approval by a supervisory board of governors (board).

Also under current law, health care providers that are subject to the health care

liability provisions of the statutes pay assessments for the mediation fund, which

pays the costs of the system for mediating medical malpractice claims against health

care providers subject to the health care liability provisions. The assessments are

set by the board by rule.

Under the bill, the assessments paid by health care providers for the injured

patients and families compensation fund continue to be set by the commissioner after

approval by the board within the same parameters as under current law, but the

assessments do not have to be set by rule; the assessments paid by health care

providers for the mediation fund continue to be set by the board, but the assessments

do not have to be set by rule; and, upon the request of the commissioner, the Joint