AB 584

Under this bill, the local government property insurance fund (fund) is subject

to rate regulations currently applied to private insurers, must levy assessments

against participating local governmental units to maintain the fund assets when the

assets fall to a certain threshold ratio with respect to premiums, and must pay

dividends when the fund assets reach a certain threshold ratio with respect to

premiums. Under current law, a local governmental unit, including any city, county,

town, village, school, or library board, may pass a resolution to insure its property,

and property that it does not own but for which it is contractually liable if the

property is damaged or destroyed, in the fund. The fund is managed by the

commissioner of insurance and provides protection for the property insured in the

fund against fire and extended coverage perils.

The bill requires that the rate standards used to regulate private insurance, to

the extent that rates are not excessive, inadequate, or unfairly discriminatory, shall

apply to the rates set by the fund. The rates must be set by actuarial determination

to maintain the ratio of the net premiums of the fund to the surplus of the fund at

no less than 200 percent. If the ratio of net premiums to surplus rises above 225

percent, then the fund must levy an assessment against all of the local governmental

units participating in the fund, in proportion to each local governmental unit's share

of premiums written by the fund. The bill also provides that if a local governmental

unit fails to pay its assessment within 60 days of the due date of the assessment, the

local governmental unit's coverage under the fund shall be terminated. As with

unpaid premiums, the fund can collect unpaid assessments and charge such unpaid

assessments against the local government unit, with interest, as a special charge.

The bill also requires the fund to pay dividends to participating local

governmental units when the fund has at least $3,000,000 in surplus and the ratio

of net premiums to surplus is less than 45 percent. The bill directs the fund to pay

dividends to participating local governmental units in proportion to each unit's share

of premiums paid.