California passes Dodd-Frank-compatible insolvency legislation

In 2010 Congress passed Dodd-Frank, which creates a process for the conservation and/or liquidation of “systemically important” financial companies by the FDIC, according to an analysis by Paul Riches, Assembly Committee consultant. Dodd-Frank contains a provision that requires systemically important insurance companies (or their affiliates) to be conserved or liquidated under state law. Under California law, this conservation/liquidation process is performed by the Insurance Commissioner through the Conservation and Liquidation Office (CLO). 

CLO operates as a fiduciary for the benefit of claimants, handling the property of the failed enterprises in a prudent, cost-effective, fair, timely, and expeditious manner.

This bill conforms the authority of the commissioner to initiate the conservation and liquidation process to the requirements of Dodd-Frank.

The bill also required liquidation notices to include a reference to a website that provides ongoing information for creditors of the company being liquidated.

After the bill’s signing, Commissioner Jones stated, “the ability to take over an insolvent insurer in a timely manner or an insurer on the verge of insolvency is pivotal to protecting California’s consumers.”

This bill also deletes obsolete reporting requirements and eliminates an advisory committee that is seen as duplicative to other CDI advisory boards and committees.  

In addition, AB 2303 makes several changes in law relating to insurance producer licenses, including the establishment of a license for insurance crop adjusters, and expansion of the Department’s pre-licensing and continuing education curriculum board to provide for representation from the insurance adjuster and bail agent industries.

The omnibus bill is basically a cleanup, federal conformity, and licensing change bill that was noncontroversial and received bipartisan, unanimous support throughout the legislative process.