SB 430: California Insurance Guarantee Association: covered claims.

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. CIGA is required to pay and discharge covered claims, and in connection therewith, pay for or furnish loss adjustment services and defenses of claimants when required by policy provisions. CIGA is authorized to fulfill its duties either directly by itself or through a servicing facility or through a contract for reinsurance and assumption of liabilities by one or more member insurers or through a contract with the liquidator, upon terms satisfactory to CIGA and to the liquidator, under which payments on covered claims would be made by the liquidator using funds provided by CIGA.

This bill would also authorize CIGA, with the Insurance Commissioners express approval, to reinsure with, or transfer liabilities to, a California admitted and authorized reinsurer or other reinsurer approved by the Insurance Commissioner in order to limit or eliminate adverse development, to stabilize or limit the need for assessments, or to reduce its potential ultimate liability for covered claims, provided certain conditions are met. The bill would require CIGA to undertake the payment and discharge of covered claims directly or through an authorized 3rd-party administrator. The bill would require any reinsurance agreement or transfer of liabilities to be paid using CIGAs available funds, and would make any recoveries from a reinsurance agreement property of CIGA, to be paid to CIGAs account from which the payment for reinsurance or transfer of liabilities was made.