Garamendi Plans Insurer Local Investment Mandate
By Steve Tuckey
NU Online News Service, Jan. 27, 3:10 p.m. EST?California Insurance Commissioner John Garamendi is proposing legislation requiring insurance companies to invest in California communities.[@@]
Mr. Garamendi, according to trade industry representatives who attended a recent meeting he chaired, discussed a measure along the lines of the federal Community Reinvestment Act, which requires banks to provide loans in low income areas where they operate.
Michael Gunning, senior legislative advocate for the Personal Insurance Federation of California, an associate member of the National Association of Mutual Insurance Companies, said the bill the commissioner is fashioning would not retain all the provisions of the CRA, such as requiring certain service levels in local areas.
The California Department of Insurance did not respond to requests for information concerning Mr. Garamendi's plan.
Mr. Gunning made his comments after attending a meeting of the California Organized Investment Network (COIN) advisory board last week. Mr. Garamendi chaired the meeting that covered two items, the California Department of Insurance Roadmap to Success and the community investment bill he is planning on sponsoring.
"NAMIC will work closely with its members, PIFC and the insurance industry to oppose Commissioner Garamendi's position on mandating such community investments," Mr. Gunning said. "We believe the proposed data call and mandated community investment is inappropriate, unnecessary and beyond the scope of the commissioner's authority."
Likewise, the American Council of Life Insurers said that it would have concerns about any mandated approach.
ACLI regional manager John Mangan stressed that he had not yet seen any proposed bill. But, he noted that his organization and member companies have been active participants in voluntary investment efforts through COIN and other means.
According to Mr. Gunning, the bill will use a formula that the commissioner began to use with the Wellpoint-Anthem merger. It requires insurers to invest a fixed amount over a fixed period of time in community investments.
The formula is composed of California Market Share (determined by California premiums divided by national premiums) multiplied by total national invested assets multiplied by a percentage to be determined later.
The commissioner reportedly gave an example using a one percent investment scenario, which would result in a $3 billion requirement for the industry. Mr. Garamendi would not release figures for all companies until he cleared it with his legal staff.
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