California Insurance Guarantee Association.

(1) Existing law creates the California Insurance Guarantee Association (CIGA) and requires all insurers admitted to transact specified insurance lines in this state to become members. Under existing law, CIGA pays and discharges covered claims, which are the obligations of an insolvent insurer that meet specified requirements. Existing law requires CIGA to collect premium payments from its member insurers sufficient to discharge its obligations. Existing law requires CIGA to allocate its claim payments and costs to the categories of workers' compensation claims, homeowners' and automobile claims, and other claims. Under existing law, if CIGA determines that the insolvency of one or more member insurers providing workers' compensation insurance will result in covered claim obligations for workers' compensation claims in excess of CIGA's capacity to pay from current funds, the board of CIGA may ask the California Infrastructure and Economic Development Bank to issue bonds. Under existing law, if a natural disaster results in covered claim obligations currently payable and owed to CIGA in excess of its capacity to pay from current funds and current premium assessment, the board of CIGA may ask the Department of Insurance to issue bonds. Existing law authorizes CIGA or the department, as appropriate, to levy assessments on CIGA member insurers to pay the principal and interest on the bonds, which member insurers recoup from insureds through a surcharge on applicable policies. Existing law creates the Workers' Comp Bond Fund and the Insurance Assessment Bond Fund, into which proceeds from the sale of bonds are deposited. This bill would repeal the provisions relative to bonds issued to discharge claims after a natural disaster, and would revise the provisions relative to bonds issued to discharge workers' compensation to additionally authorize CIGA to ask the California Infrastructure and Economic Development Bank to issue bonds if CIGA determines the insolvency of member insurers writing homeowners' and automobile insurance and other insurance will result in covered claim obligations in excess of CIGA's capacity to pay from current funds. If the board of CIGA asks the California Infrastructure and Economic Development Bank to issue bonds, the bill would require the board to report specified information to the Assembly Committee on Insurance and the Senate Committee on Insurance within 60 days of the request, and annually thereafter while the bonds remain outstanding. The bill would authorize CIGA to levy an assessment on member insurers writing homeowners' and automobile insurance and other insurance to pay the principal of, and interest on, the bonds issued for that claims category, which would be recouped through a surcharge on applicable policies, thereby imposing a tax. The bill would create the Homeowners' and Automobile Bond Fund and the Other Bond Fund into which proceeds from the sale of bonds to cover claims in those categories of insurance would be deposited. The bill would also make conforming changes. This bill would specify that obligations under a policy issued to cover cybersecurity are covered claims, as long as CIGA's total liability does not exceed $1,000,000 or the policy limits, whichever is less. (2) Existing law requires CIGA to adopt a plan of operation that requires a member insurer to recoup the premium charge paid by the member insurer through a surcharge on premiums charged for insurance policies in the year following the premium charge. This bill would require the plan of operation to require a member insurer to recoup the premium charge amount, as determined by CIGA, through a surcharge on premiums, even if a premium charge has not yet been paid to CIGA because the member insurer had no direct written premium for that category of insurance for the prior year. (3) This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.