--
Mr. Chorpenning noted that these limitations may be extended with permission of the Director of
DOI.
Mike Low, representing SunAmerica Life Insurance Company, testified in favor of S.B. 1113. He
introduced his guest, Victor Bacigalupi, PMI Mortgage Insurance Company, who is visiting the
Legislature today. He advised that SunAmerica is the largest domestic insurance company
domiciled in Arizona, and is a major real estate investor in the State. He revealed that this legislation
has been requested by SunAmerica because Arizona is one of the few states that does not have a
specific statute governing investments in limited partnerships and limited liability companies. Many
major investments will use a limited partnership or a limited liability company as a vehicle for
purposes of that investment. He declared that the Department is comfortable with this legislation.
He asked the Committee for favorable passage of this proposal which permits large companies that
have these types of assets to make these investments.
Chairman Marsh announced that he had a Request to Speak form from the following person who has
indicated that he is taking no position on Senate Bill 1113:
Greg Harris, Executive Assistant Director, Department of Insurance (DOI)
S.B. 1031, surplus lines insurance; brokers - DISCUSSED AND HELD
Pat Chorpenning, Majority Research Analyst, explained the provisions of S.B. 1031 relating to
surplus lines insurance (see Bill Summary, Attachment 3). The bill permits the Director to contract
with surplus lines brokers to receive and process required filings of surplus lines brokers. The bill
sets forth provisions relating to reporting requirements, reasonable fees to be collected, diligent effort
in procuring insurance, time frame for filing reports, disclosure requirements, foreign insurers, and
payment of premium taxes. The bill establishes the licensing category of Mexican surplus lines
broker for procuring auto insurance that is effective in Mexico, and exempts them from reporting
requirements, licensing exams and requirements. In addition, a disclaimer is included which states
that there is no protection under Arizona law on all Mexican policies issued in this State The bill
contains Proposition 108 language in that a two-thirds vote is required.
In response to Mr. Kyle, Mr. Chorpenning answered that "white listing" is a phrase used in the
insurance industry. It is the Department's list of acceptable surplus insurers.
Sandra Rogers, representing herself, Why, testified against S.B. 1031. She advised that she sells
Mexico trip insurance and said she is concerned how the proposed legislation will affect business.
She shared some of her objections to the bill: claims not being paid, no licensing requirements, very
little control. She said she believes a bond may be more appropriate. She said she does not like the
Department's responsibility disclaimer. She stated that the bill will cause bad public relations and
bad business practices.
Al Gay, representing himself, Lukeville, spoke against the provision relating to the Department's
lack of responsibility. He said this does not protect the public and is not fair. He maintained that
each location should be licensed and should post a bond. He opined that the provisions of the bill
will be far-reaching, and will hurt trade and hurt people.
Artemisa Julander, representing herself, Why, testified that there should be a fund to protect the
public. She said that the public has to be covered. Everyone who sells insurance should know what
they are selling so the public can be protected.
Mrs. Gonzales asked where this bill came from.
Greg Harris, Executive Assistant Director, Department of Insurance (DOI), testified that this bill
represents the efforts of many people at the Department and the industry. He said that the
Department sought to codify existing law with respect to how Arizona law affects policies written
by a company licensed to transact insurance in a country other than the United States. Those policies
are governed by the laws of another country. He revealed that Arizona laws have never applied to
policies sold going across the border. The notice provision in this bill is an attempt to alert
purchasers that the policy is not subject to the provisions of Arizona law.
With respect to other issues raised, Mr. Harris stated that licensing continues to be required for
brokers who sell policies across the border. The bond requirement and licensing fee are not as high
for brokers who sell insurance policies for coverage in Mexico as it is for regular surplus line
brokers.
Chairman Marsh asked Mr. Harris if concerns raised here today can be addressed. Mr. Harris again
advised that the State cannot impose our law on policies written by a Mexican company that applies
only in Mexico. He said it is fair and appropriate to let consumers know when they buy this
coverage that the Department has no authority to intercede on behalf of purchasers of that coverage.
Ms. Aguirre questioned what purchasers are buying with coverage. Mr. Harris responded that the
proposed law mirrors what the current practice is. What does change is the minimizing of the
licensing requirement and the scaling back on the bonding requirements. He stated that Arizona has
a financial responsibility law that applies when driving on our roads; similar laws apply in Mexico.
Compliance with Mexican law requires that a person have coverage sold by a company authorized
to transact business in Mexico.
Chairman Marsh announced that S.B. 1031 will be held for future discussions.
S.B. 1112, insurer; rehabilitation; liquidation - DISCUSSED AND HELD
Pat Chorpenning, Majority Research Analyst, explained the provisions of S.B. 1112 relating to
insurer rehabilitation and liquidation (see Bill Summary, Attachment 4). The bill clarifies the role
of the Director of the Department of Insurance during rehabilitation or liquidation of an insolvent
insurance company. The bill defines the Director as the receiver. It also clarifies how and by whom
funds collected from insolvent insurance company stockholders will be distributed.
Anthony Mormino, Associate Counsel, Reinsurance Association of America, addressed the
provisions of S.B. 1112 dealing with the exclusive conditions and procedures that the court can set
regarding records and access to them. The purpose of the bill is to centralize and standardize
procedures for access to information of an insolvent company in the liquidation court, and the
Association completely supports that effort. The concern of the Association relates to the rights that
the reinsurer has to information. This statute, as written, gives the court the power to eliminate
those rights.
Chairman Marsh announced that S.B. 1112 will be held until next week.
S.B. 1111, insurance administrators - NO TIME
Chairman Marsh announced that S.B. 1111 will be held due to lack of time.
Without objection, the meeting adjourned at 2:45 p.m.
_________________________________
Joanne Bell, Committee Secretary
(Attachments and tape on file in the Office of the Chief Clerk.)
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