Fiscal Note - SB 0096 - Requires Insurers to Invest a Minimum Percentage of Premiums in Low Income Communities
L.R. NO. 0481-01
BILL NO. SB 96
SUBJECT: Housing, Insurance-General, Insurance-Life, Business, Public
Assistance
TYPE: Original
DATE: January 2, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Insurance
Dedicated ($39,495) ($39,692) ($40,695)
Total Estimated
Net Effect on All
State Funds ($39,495) ($39,692) ($40,695)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials from the Department of Economic Development and the Office of
Attorney General assume this proposal would not fiscally impact their agency.
Department of Insurance (INS) officials assume this proposal would represent
additional duties to the department. They assume an additional FTE, plus
related expense and equipment would be required to implement the additional
duties outlined in this proposal. INS states approximately 100 insurers
currently write an average of $15,000,000 in annual premiums. The additional
staff would be required to analyze, monitor, and record information provided
with the current annual statement data. One Insurance Financial Analyst II
($27,612) would review annual statement data for number and type of
economically targeted investments, calculation of appropriate economically
targeted investments and comparison with applied amount, prepare notices of
compliance/noncompliance to be sent to each insurer as required, calculate
penalties and verify compliance after assessed penalty, and has liaison
duties with other INS staff (admissions and legal) for suspension or
cancellation of certificates of authority. Expenses would include
communication and office expenses ($2,335). Equipment would include office
furniture and a personal computer for one FTE ($7,248).
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
INSURANCE DEDICATED FUND
Costs - Department of Insurance
Personal service (1 FTE) ($23,576) ($29,010) ($29,735)
Fringe benefits ($6,726) ($8,277) ($8,483)
Expense and equipment ($9,193) ($2,405) ($2,477)
Total Costs - Department of Insurance($39,495) ($39,692) ($40,695)
ESTIMATED NET EFFECT ON
INSURANCE DEDICATED FUND ($39,495) ($39,692) ($40,695)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
$0 $0 $0
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that
insurance companies could provide financial assistance programs to small
business and housing.
DESCRIPTION
This proposal requires all licensed insurers with annual direct written
premiums of over $15 million to make economically targeted investments in
low-income communities. Life insurers must invest 1% of their direct written
premiums in such communities, and all other insurers shall invest 1/2% of
their direct written premiums. Economically targeted investments include
equity or debt investments in various organizations and businesses, community
development loans, federal housing projects, local affordable housing
projects, purchases of loans for affordable housing, and grants or deferred
interest loans for various projects. Insurers get double credit for
investments in small businesses for low-income people, small businesses or
farms and investments in low-income economic development and housing. The
investment requirement is imposed first in the 1998 calendar year. The 1999
calendar year requirement includes the 1998 year's investments. The 2000
calendar year requirement includes the two previous years' investments. All
subsequent years' investment requirements include the two previous years'
investments. Every insurer shall adopt an annual community investment plan
and file it with the director of the Department of Insurance. The Director
of Insurance may issue an order to show cause if he feels investments have
not been properly made. Monetary penalties of up to $50,000 per year may be
imposed, plus $150,000 for failing to comply with an order of the Director.
The insurer's certificate of authority may also be suspended or revoked.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Insurance
Department of Economic Development
Office of Attorney General
This Fiscal Note is not an official copy and should not be quoted or cited.