SACRAMENTO, CA, April 25, 2019 – IIABCal Lobbyist John Norwood testified before the Senate Insurance Committee yesterday on behalf of the association’s member agents and brokers opposing a bill that would place a tax on most residential and commercial insurance policyholders in the aftermath of a catastrophic earthquake.

Norwood’s testimony followed a grassroots effort last week by IIABCal members who contacted their legislators on the committee to oppose SB 254, a bill sponsored by the California Earthquake Authority as a way to reduce it cost of reinsurance and use the savings from lower reinsurance costs to fund their brace and bolt program wherein they provide grants for homeowners in high earthquake prone areas to retrofit their homes.

According to the CEA, this is an innovative way to provide funding to proactively lower the damages from a mega earthquake by adding a layer of contingent assessment to the financial layer-cake supporting the Authority at a level where it there is actuarially less than a 1% chance an earthquake of the magnitude that would trigger the assessment would ever happen.

The hearing on the bill lasted two-and-one half hours which is extremely rare.  In his testimony before lawmakers, Norwood indicated that IIABCal opposed the bill because it proposed to make a number of unprecedented changes to the Insurance Code that would adversely affect independent agents and brokers, surplus line brokers and their customers.

Among other things, Norwood testified, the bill would breach the walls separating CEA and non CEA insurers and policyholders, create cross subsidies, result in multiple assessments on policyholders, including most commercial insurance, impose assessments on lines of insurance never previously assessed like non-admitted insurers and impose assessments on surplus line brokers.

“Simply said, we do not buy the idea that our clients should accept unprecedented changes that are potentially adverse to our members based on the theory that the triggering event for the assessments are so remote that is likely  it will never happen,” Norwood said in his testimony

SB 254 initially received only 2 votes of the 13-member committee. However, after the author, Senator Hertzberg,  made commitments that he would not bring the bill up on the Senate floor without resolving the tax issue that caused the bill to  tagged as a 2/3s vote bill and try to modify the bill to address issues raised by the opposition, he was able to garner the needed courtesy votes to move the bill to the Senate Appropriations Committee for consideration.

“Although the bill passed the Insurance Committee, it virtually limped out with committee members indicating they would likely not vote for the bill on the Senate floor,” Norwood said. “Certainly, calls and Emails from IIABCal members contributed to the reservations senators expressed about the bill.”