SENATE BILL REPORT
HB 1236
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
As Reported By Senate Committee On:
Financial Institutions & Insurance, March 27, 2007
Title: An act relating to the capital and surplus requirements necessary to transact insurance.
Brief Description: Establishing certain capital and surplus requirements necessary to transact insurance.
Sponsors: Representatives Roach, Kirby, Simpson and Moeller; by request of Insurance Commissioner.
Brief History: Passed House: 2/14/07, 95-0.
Committee Activity: Financial Institutions & Insurance: 3/21/07, 3/27/07 [DP].
SENATE COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE
Majority Report: Do pass.Signed by Senators Berkey, Chair; Hobbs, Vice Chair; Franklin, Hatfield, Parlette and Schoesler.
Staff: Diane Smith (786-7410)
Background: The Insurance Commissioner (Commissioner) is authorized to regulate all
insurance business in Washington, including determinations of authority to transact all kinds of
insurance. One of the requirements to initially qualify for authority to transact insurance is that
the insurer maintain in its possession certain unimpaired levels of paid-in capital stock or basic
surplus, plus additional surplus. These levels must be maintained after the insurer initially
qualifies for authority to transact the given kind of insurance.
Paid-in capital stock requirements apply to an insurance company organized as a stock company.
This is a for-profit company that generates its initial capital by selling stock to investors.
Basic surplus requirements apply to mutual insurance companies. These are corporations owned
by their policyholders. What would be profit distributed as dividends to the shareholders of a
stock company, is returned as dividends to the policyholders of a mutual company, reducing
premium payments. Basic surplus for the mutual insurance company is the excess of its assets
over its liabilities.
Ocean marine and foreign trade insurances are insurances of vessels; marine builders' risks,
marine war risks, and indemnity; freights; and personal property as it is imported or exported,
including coastwise, by land, water or air for all risks or perils of navigation, transit or
transportation and during preparation for and while awaiting, shipment.
Summary of Bill: The date on which the initial capital and surplus requirements apply is
clarified to be when the insurer initially qualifies for authority to transact the various kinds of
insurance.
The ocean marine and foreign trade kinds of insurances are included as kinds of insurance for
purposes of the initial capital and surplus requirements. The minimum basic surplus requirement
is $2 million and $2 million required as additional surplus.
It is clarified for domestic insurers that the capital and surplus requirements apply immediately
upon acquisition or merger and that once attained, the capital and surplus requirements may not
return to previous June 9, 1994, levels.
Appropriation: None.
Fiscal Note: Available.
Committee/Commission/Task Force Created: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Staff Summary of Public Testimony: PRO: This bill is identical to the Senate bill.
Persons Testifying: PRO: Mary Clogston, Office of the Insurance Commissioner.