California FAIR Plan Association.

Plain English Breakdown

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California FAIR Plan Association Bonds

AB-226 allows the California FAIR Plan Association to request bonds from the California Infrastructure and Economic Development Bank for financing claims, increasing liquidity, and refunding previous bonds with approval from the Insurance Commissioner.

What This Bill Does

• Allows the FAIR Plan Association to ask the California Infrastructure and Economic Development Bank for bonds if approved by the Insurance Commissioner.
• Enables the bank to issue bonds to finance claim costs, increase the association's liquidity, or refund old bonds.
• Requires the FAIR Plan Association to repay any loans from bond proceeds on time; otherwise, it must collect money from its members to cover debts.
• Permits the FAIR Plan Association to secure these financial agreements with a statutory lien.

Who It Names or Affects

• The California FAIR Plan Association
• Insurance companies participating in the association
• The California Infrastructure and Economic Development Bank

Terms To Know

FAIR Plan Association

A group of insurance companies that work together to provide basic property insurance for people who can't get it through regular channels.

Infrastructure and Economic Development Bank

An organization that issues bonds to fund projects or costs requested by state entities or participating parties.

Limits and Unknowns

• The bill does not specify the exact amount of additional revenue expected for the California Infrastructure and Economic Development Bank Fund.
• It is unclear how many insurance companies will be affected by this change in bond issuance rules.

Official Summary Text

AB 226, Calderon.
California FAIR Plan Association.
The California FAIR Plan Association is a joint reinsurance association in which all insurers licensed to write basic property insurance participate in administering a program for the equitable apportionment of basic property insurance for persons who are unable to obtain that coverage through normal channels. Existing law requires the association’s plan of operation and any amendment to the plan to be approved by the Insurance Commissioner. Existing law establishes the California Infrastructure and Economic Development Bank and authorizes it to issue bonds to provide funds for the payment of costs of a project for a participating party or upon request by a state entity.
This bill would authorize the association, if granted prior approval from the commissioner, to request the California Infrastructure and Economic Development Bank to issue
bonds, and would authorize the bank to issue those bonds to finance the costs of claims, to increase liquidity and claims-paying capacity of the association, and to refund bonds previously issued for that purpose. The bill would specify that the association is a participating party and that financing all or any portion of the costs of claims or to increase liquidity and the claims-paying capacity of the association is a project for bond purposes. The bill would authorize the bank to loan the proceeds of issued bonds to the association, and would authorize the association to enter into a loan agreement with the bank and to enter into a line of credit agreement or other agreement
This bill would require the association, if the above-described bonds, loan agreements, or lines of credit received the prior approval of the commissioner, and if the association is unable to timely and fully meet its repayment obligation, to assess members in the amounts and at the times
necessary to timely pay in full all obligations of the association with respect to those bonds, loan agreements, lines of credit, and other agreements, as specified. The bill would authorize the association to secure those bonds, loan agreements, lines of credit, and other agreements by a statutory lien, as specified.
Existing law establishes the California Infrastructure and Economic Development Bank Fund, a continuously appropriated fund, for the purpose of implementing the objectives of the bank.
To the extent that the bill would result in additional revenues being deposited into the California Infrastructure and Economic Development Bank Fund, the bill would make an appropriation.
This bill would declare that it is to take effect immediately as an urgency statute.

Current Bill Text

Download Bill PDF