1063.50. The California Insurance Guarantee Association is
authorized to pay and discharge certain claims of insolvent insurers
as defined in Section 1063.1 through the collection of premiums from
its members, which amounts are limited by law and take time to assess
and collect. If a natural disaster such as a major earthquake or
fire were to occur in California, California's housing stock could be
adversely affected and there could be an immediate need for large
sums of money to pay covered claims of insolvent insurers. This
article provides for the ability of the department to issue bonds to
more expeditiously and effectively provide for the payment of covered
claims that arise as a result of a natural disaster. The bonds are
to be paid from the premiums assessed by the department or by CIGA
for those purposes. It is a public purpose and in the best interest
of the public health, safety, and general welfare of the residents of
this state to provide for the issuance of bonds by the department to
pay claimants and policyholders having covered claims against
insolvent insurers operating in this state.
1063.51. (a) The terms "member insurer," "insolvent insurer," and
"covered claims" have the meanings assigned those terms in Section
1063.1.
(b) "CIGA" means the California Insurance Guarantee Association,
established pursuant to Article 14.2 (commencing with Section 1063).
(c) "Commissioner" means the Insurance Commissioner.
(d) "Board" means the board of governors of CIGA.
(e) "Department" means the Department of Insurance.
(f) "Insurance Assessment Bond Fund" is the fund created pursuant
to Section 1063.52.
(g) "Insurance assessments" means the premiums collected by the
department or by CIGA pursuant to Section 1063.5, 1063.53, or
1063.54.
1063.52. The Insurance Assessment Bond Fund is hereby created in
the State Treasury. Proceeds from the sale of bonds issued pursuant
to this article and insurance assessments to repay bonds issued
pursuant to this article shall be deposited in the Insurance
Assessment Bond Fund.
All money in the fund is hereby continuously appropriated to the
department for the exclusive purpose of carrying out the purposes of
this part, and, notwithstanding the provisions of Chapter 2
(commencing with Section 12850) of Part 2.5 of Division 3 of Title 2
of the Government Code or the provisions of Article 2 (commencing
with Section 13320) of Chapter 3 of Part 3 of Division 3 of Title 2
of the Government Code, or the provisions of Sections 11032 and 11033
of the Government Code, application of the fund shall not be subject
to the supervision or budgetary approval of any other officer or
division of state government. The department may pledge any or all of
the moneys in the fund as security for payment of the principal of,
and interest and redemption premiums, if any, on, bonds issued
pursuant to this article, and, for that purpose or as necessary or
convenient to the accomplishment of any other purpose under this
article, may divide the fund into separate accounts.
1063.53. (a) In the event a natural disaster such as an earthquake
or fire results in covered claim obligations currently payable and
owed by the association in excess of its capacity to pay from current
funds and current premium assessments allowable under Section
1063.5, and upon a declaration of emergency by the Governor or the
President of the United States, the board, in its sole discretion,
may by resolution request the department to issue bonds pursuant to
this article to provide funds for the payment of covered claims and
expenses related thereto. Should the bonds be issued, the department
shall have the authority to levy upon member insurers insurance
assessments in the amount necessary to pay the principal of and
interest on the bonds, and to meet other requirements established by
agreements relating to the bonds. The department may enter into an
agreement with CIGA for CIGA to act as agent for the department to
collect the assessments.
The department may assume the obligation to pay the covered claims
of insolvent insurers for the purpose of paying the claims with the
proceeds of the bonds. The obligation of the department to pay claims
shall be a limited obligation payable only out of the proceeds of
the bonds. The department shall enter into an agreement with CIGA for
CIGA to act as agent of the department to adjust and administer the
payment of the claims. Premium payments collected pursuant to this
authority may only be used for servicing the bond obligations
provided for in this section and may be pledged for that purpose.
Premium assessments made pursuant to this section shall also be
subject to the surcharge provisions in Sections 1063.14 and 1063.145.
(b) In addition to the premium assessments provided for in this
section, the board in its discretion and subject to other obligations
of the association, may utilize current funds of the association,
premium assessments made under Section 1063.5, and advances or
dividends received from the liquidators of insolvent insurers to pay
the principal and interest on any bonds issued at the board's
request.
1063.54. Notwithstanding any other provision of law, the
department, in accordance with this article and at the request of the
board pursuant to Section 1063.53 may issue bonds in order to
provide for the payment of covered claims of insolvent insurers or in
order to make loans to CIGA, which moneys CIGA is hereby authorized
to borrow, to provide for the payment of covered claims of insolvent
insurers. For this purpose, the department or CIGA may levy upon
member insurers insurance assessments in the amounts necessary to pay
the principal of and interest on the bonds and to meet other
requirements established by agreements relating to the bonds. The
department shall enter into an agreement with CIGA for CIGA to act as
agent for the department to collect the assessments. The department
may assume the obligation to pay the covered claims of insolvent
insurers for the purpose of paying the claims with the proceeds of
the bonds. The obligation of the department to pay claims shall be a
limited obligation payable only out of the proceeds of the bonds. The
department shall enter into an agreement with CIGA for CIGA to act
as agent of the department to adjust and administer the payment of
claims. The total bonded indebtedness authorized pursuant to this
article shall not exceed the level that can be supported by the
revenues dedicated to retiring the bonds.
1063.55. The bonds shall be authorized by order of the
commissioner, shall be in the form, shall bear the date or dates, and
shall mature at the time or times as the order or the indenture
authorized by the order may provide, except that no bond shall mature
more than 20 years from the date of its issue. The bonds may be
issued as serial bonds or as term bonds, or as a combination thereof,
and, notwithstanding any other provision of law, the amount of
principal of, or interest on, bonds maturing at each date of maturity
need not be equal. The bonds shall bear interest at the rate or
rates, variable or fixed or a combination thereof, be in the
denominations, be in the form, either coupon or registered, carry the
registration privileges, be executed in the manner, be payable in
the medium of payment at the place or places within or without the
state, be subject to the terms of redemption, and contain the terms
and conditions as the order or indenture may provide. The bonds shall
be sold at public or private sale by the Treasurer at, above, or
below the principal amount thereof, on the terms and conditions and
for the consideration in the medium of payment that the Treasurer
shall determine prior to the sale.
1063.56. Upon receipt of an order of the commissioner authorizing
the issuance of bonds, the Treasurer shall provide for their
preparation in accordance with the order. The bonds authorized to be
issued shall be sold by the Treasurer, at public sale or at private
sale, as directed by the order. In the case of a public sale, (a) the
bonds shall be sold by the Treasurer at such times as may be fixed
by him or her, and upon such notice as he or she may deem to be
advisable, upon sealed bids, to the bidder whose bid will result in
the lowest net interest cost on account of the bonds, and (b) if no
bids are received, or if the Treasurer determines that the bids are
not satisfactory, the Treasurer may reject all bids received, if any,
and either readvertise or sell the bonds at private sale.
1063.57. The department may provide for the issuance of refunding
bonds for the purpose of refunding any bonds then outstanding which
have been issued under the provisions of this article, including the
payment of any redemption premium thereon and any interest accrued or
to accrue to the date of redemption of those bonds. The issuance of
the obligations, the maturities and other details thereof, the rights
of the holders thereof, and the rights, duties, and obligations of
the department in respect of the same shall be governed by the
provisions of this article that relate to the issuance of bonds,
insofar as those provisions may be appropriate therefor.
1063.58. Refunding bonds issued as provided in Section 1063.57 may
be sold, or exchanged for outstanding bonds issued under this article
and, if sold, the proceeds thereof may be applied, in addition to
any other authorized purposes, to the purchase, redemption, or
payment of the outstanding bonds. Pending the application of the
proceeds of the refunding bonds, with any other available moneys, (a)
to the payment of the principal, accrued interest, and any
redemption premium on the bonds being refunded, (b) to the payment of
any interest on those refunding bonds, or (c) to any expenses
incurred in connection with the refunding, the proceeds may be
invested in obligations permitted under the bond resolution
authorizing the issuance of refunding bonds.
1063.59. The Treasurer or any other person executing the notes or
bonds shall not be subject to any personal liability or
accountability by reason of the issuance thereof.
1063.60. The department may issue negotiable bond anticipation
notes and may refund those notes from time to time. Bond anticipation
notes may be paid from the proceeds of sale of the bonds of the
department in anticipation of which they were issued. Bond
anticipation notes and agreements relating thereto and the order or
orders authorizing those notes and agreements may contain any
provisions, conditions, or limitations that a bond, agreement
relating thereto, or bond order of the department may contain.
1063.61. The state does hereby pledge to and agree with the holders
of any bonds issued under this article that the state will not limit
or alter the rights hereby vested in the department to fulfill the
terms of any agreements made with the holders thereof or in any way
impair the rights and remedies of those holders until the bonds,
together with the interest thereon, with interest on any unpaid
installments of interest, and all costs and expenses in connection
with any action or proceeding by or on behalf of those holders, are
fully met and discharged. The department is authorized to include
this pledge and agreement of the state in any agreement with the
holders of the notes or bonds.
1063.62. Bonds issued under this article shall be legal investments
in which all public officers and public bodies of this state, its
political subdivisions, all municipalities and municipal
subdivisions, all insurance companies and associations and other
persons carrying on an insurance business, all banks, bankers,
banking institutions, including savings and loan associations,
building and loan associations, trust companies, savings banks and
savings associations, investment companies and other persons carrying
on a banking business, all administrators, guardians, conservators,
executors, trustees and other fiduciaries, and all other persons
whatsoever who are now or may hereafter be authorized to invest in
bonds or in other obligations of the state, may properly and legally
invest funds, including capital, in their control or belonging to
them. The bonds may be used by those private financial institutions,
persons, or associations as security for public deposits. The bonds
are also hereby made securities which may properly and legally be
deposited with and received by all public officers and bodies of the
state or any agency or political subdivision of the state and all
municipalities and public corporations for any purpose for which the
deposit of bonds or other obligations of the state is now or may
hereafter be authorized by law, including deposits to secure public
funds.
1063.63. All or any part of the revenues from the insurance
assessments or from loan repayments by CIGA may be pledged by the
department to secure the repayment of any bonds issued under this
article and to pay costs incurred in the issuance or administration
of the bonds. Any pledge made to secure the bonds shall be valid and
binding from the time the pledge is made. The revenues pledged and
thereafter received by the department or by any trustee, depository
or custodian shall be deposited in a separate account and shall be
immediately subject to the lien of the pledge without any physical
delivery thereof or further act, and the lien of the pledge shall be
valid and binding against all parties having claims of any kind in
tort, contract, or otherwise against the department, CIGA, or the
trustee, depository, or custodian, irrespective of whether the
parties have notice thereof. The indenture or agreement by which the
pledge is created need not be recorded. All of those insurance
assessments, to the extent so pledged, are hereby continuously
appropriated for that purpose.
1063.64. The department and CIGA are each authorized to enter into
those contracts or agreements with those banks, insurers, or other
financial institutions that it determines are necessary or desirable
to improve the security and marketability of the bonds issued under
this article. Those contracts or agreements may contain an obligation
to reimburse, with interest, any of those banks, insurers, or other
financial institutions for advances used to pay the purchase price
of, or principal or interest on, the bonds. Any such reimbursement
obligation shall be payable solely from, and may be secured by a
pledge of, the revenues derived from the insurance assessments levied
for that purpose or from loan repayments by CIGA.
1063.65. The bonds shall not be, and shall state on their face that
they are not, general obligations of the department or of the state
or any political subdivision thereof, but are limited obligations of
the state.
Bonds issued under the provisions of this article shall not be
deemed to constitute a debt or liability or general obligation of the
state or any political subdivision thereof other than as provided in
this article and shall be payable solely from funds herein provided
therefor. All of the bonds and any prospectus or other printed
representation of the department concerning the bonds shall contain
on the face thereof a statement to the following effect: "Neither the
faith and credit nor the taxing power of the State of California is
pledged to the payment of the principal of, or interest on, this
bond."
The issuance of bonds under the provisions of this article shall
not directly or indirectly or contingently obligate the state or any
political subdivision thereof to levy or to pledge any form of
taxation whatever therefor or to make any appropriation for their
payment.
1063.66. Bonds issued by the department pursuant to this article,
their transfer and the income therefrom, shall be free from taxation
of every kind by the state and every city or county or other
political subdivision of the state, except inheritance and gift
taxes.
1063.67. The department is authorized and empowered to employ
financial consultants, advisers, legal counsel, and accountants as
may be necessary in its judgment in connection with the issuance and
sale of any bonds or other obligations of the department. Payment for
these services may be made out of the proceeds of the sale of the
bonds or other obligations. The department may delegate to the
Treasurer the employment of those professionals.
1063.68. The provisions of Section 10295 and Sections 10335 to
10382, inclusive, of the Public Contract Code shall not apply to
agreements entered into by the department or Treasurer in connection
with the obtaining of financing.
1063.50. The California Insurance Guarantee Association is
authorized to pay and discharge certain claims of insolvent insurers
as defined in Section 1063.1 through the collection of premiums from
its members, which amounts are limited by law and take time to assess
and collect. If a natural disaster such as a major earthquake or
fire were to occur in California, California's housing stock could be
adversely affected and there could be an immediate need for large
sums of money to pay covered claims of insolvent insurers. This
article provides for the ability of the department to issue bonds to
more expeditiously and effectively provide for the payment of covered
claims that arise as a result of a natural disaster. The bonds are
to be paid from the premiums assessed by the department or by CIGA
for those purposes. It is a public purpose and in the best interest
of the public health, safety, and general welfare of the residents of
this state to provide for the issuance of bonds by the department to
pay claimants and policyholders having covered claims against
insolvent insurers operating in this state.
1063.51. (a) The terms "member insurer," "insolvent insurer," and
"covered claims" have the meanings assigned those terms in Section
1063.1.
(b) "CIGA" means the California Insurance Guarantee Association,
established pursuant to Article 14.2 (commencing with Section 1063).
(c) "Commissioner" means the Insurance Commissioner.
(d) "Board" means the board of governors of CIGA.
(e) "Department" means the Department of Insurance.
(f) "Insurance Assessment Bond Fund" is the fund created pursuant
to Section 1063.52.
(g) "Insurance assessments" means the premiums collected by the
department or by CIGA pursuant to Section 1063.5, 1063.53, or
1063.54.
1063.52. The Insurance Assessment Bond Fund is hereby created in
the State Treasury. Proceeds from the sale of bonds issued pursuant
to this article and insurance assessments to repay bonds issued
pursuant to this article shall be deposited in the Insurance
Assessment Bond Fund.
All money in the fund is hereby continuously appropriated to the
department for the exclusive purpose of carrying out the purposes of
this part, and, notwithstanding the provisions of Chapter 2
(commencing with Section 12850) of Part 2.5 of Division 3 of Title 2
of the Government Code or the provisions of Article 2 (commencing
with Section 13320) of Chapter 3 of Part 3 of Division 3 of Title 2
of the Government Code, or the provisions of Sections 11032 and 11033
of the Government Code, application of the fund shall not be subject
to the supervision or budgetary approval of any other officer or
division of state government. The department may pledge any or all of
the moneys in the fund as security for payment of the principal of,
and interest and redemption premiums, if any, on, bonds issued
pursuant to this article, and, for that purpose or as necessary or
convenient to the accomplishment of any other purpose under this
article, may divide the fund into separate accounts.
1063.53. (a) In the event a natural disaster such as an earthquake
or fire results in covered claim obligations currently payable and
owed by the association in excess of its capacity to pay from current
funds and current premium assessments allowable under Section
1063.5, and upon a declaration of emergency by the Governor or the
President of the United States, the board, in its sole discretion,
may by resolution request the department to issue bonds pursuant to
this article to provide funds for the payment of covered claims and
expenses related thereto. Should the bonds be issued, the department
shall have the authority to levy upon member insurers insurance
assessments in the amount necessary to pay the principal of and
interest on the bonds, and to meet other requirements established by
agreements relating to the bonds. The department may enter into an
agreement with CIGA for CIGA to act as agent for the department to
collect the assessments.
The department may assume the obligation to pay the covered claims
of insolvent insurers for the purpose of paying the claims with the
proceeds of the bonds. The obligation of the department to pay claims
shall be a limited obligation payable only out of the proceeds of
the bonds. The department shall enter into an agreement with CIGA for
CIGA to act as agent of the department to adjust and administer the
payment of the claims. Premium payments collected pursuant to this
authority may only be used for servicing the bond obligations
provided for in this section and may be pledged for that purpose.
Premium assessments made pursuant to this section shall also be
subject to the surcharge provisions in Sections 1063.14 and 1063.145.
(b) In addition to the premium assessments provided for in this
section, the board in its discretion and subject to other obligations
of the association, may utilize current funds of the association,
premium assessments made under Section 1063.5, and advances or
dividends received from the liquidators of insolvent insurers to pay
the principal and interest on any bonds issued at the board's
request.
1063.54. Notwithstanding any other provision of law, the
department, in accordance with this article and at the request of the
board pursuant to Section 1063.53 may issue bonds in order to
provide for the payment of covered claims of insolvent insurers or in
order to make loans to CIGA, which moneys CIGA is hereby authorized
to borrow, to provide for the payment of covered claims of insolvent
insurers. For this purpose, the department or CIGA may levy upon
member insurers insurance assessments in the amounts necessary to pay
the principal of and interest on the bonds and to meet other
requirements established by agreements relating to the bonds. The
department shall enter into an agreement with CIGA for CIGA to act as
agent for the department to collect the assessments. The department
may assume the obligation to pay the covered claims of insolvent
insurers for the purpose of paying the claims with the proceeds of
the bonds. The obligation of the department to pay claims shall be a
limited obligation payable only out of the proceeds of the bonds. The
department shall enter into an agreement with CIGA for CIGA to act
as agent of the department to adjust and administer the payment of
claims. The total bonded indebtedness authorized pursuant to this
article shall not exceed the level that can be supported by the
revenues dedicated to retiring the bonds.
1063.55. The bonds shall be authorized by order of the
commissioner, shall be in the form, shall bear the date or dates, and
shall mature at the time or times as the order or the indenture
authorized by the order may provide, except that no bond shall mature
more than 20 years from the date of its issue. The bonds may be
issued as serial bonds or as term bonds, or as a combination thereof,
and, notwithstanding any other provision of law, the amount of
principal of, or interest on, bonds maturing at each date of maturity
need not be equal. The bonds shall bear interest at the rate or
rates, variable or fixed or a combination thereof, be in the
denominations, be in the form, either coupon or registered, carry the
registration privileges, be executed in the manner, be payable in
the medium of payment at the place or places within or without the
state, be subject to the terms of redemption, and contain the terms
and conditions as the order or indenture may provide. The bonds shall
be sold at public or private sale by the Treasurer at, above, or
below the principal amount thereof, on the terms and conditions and
for the consideration in the medium of payment that the Treasurer
shall determine prior to the sale.
1063.56. Upon receipt of an order of the commissioner authorizing
the issuance of bonds, the Treasurer shall provide for their
preparation in accordance with the order. The bonds authorized to be
issued shall be sold by the Treasurer, at public sale or at private
sale, as directed by the order. In the case of a public sale, (a) the
bonds shall be sold by the Treasurer at such times as may be fixed
by him or her, and upon such notice as he or she may deem to be
advisable, upon sealed bids, to the bidder whose bid will result in
the lowest net interest cost on account of the bonds, and (b) if no
bids are received, or if the Treasurer determines that the bids are
not satisfactory, the Treasurer may reject all bids received, if any,
and either readvertise or sell the bonds at private sale.
1063.57. The department may provide for the issuance of refunding
bonds for the purpose of refunding any bonds then outstanding which
have been issued under the provisions of this article, including the
payment of any redemption premium thereon and any interest accrued or
to accrue to the date of redemption of those bonds. The issuance of
the obligations, the maturities and other details thereof, the rights
of the holders thereof, and the rights, duties, and obligations of
the department in respect of the same shall be governed by the
provisions of this article that relate to the issuance of bonds,
insofar as those provisions may be appropriate therefor.
1063.58. Refunding bonds issued as provided in Section 1063.57 may
be sold, or exchanged for outstanding bonds issued under this article
and, if sold, the proceeds thereof may be applied, in addition to
any other authorized purposes, to the purchase, redemption, or
payment of the outstanding bonds. Pending the application of the
proceeds of the refunding bonds, with any other available moneys, (a)
to the payment of the principal, accrued interest, and any
redemption premium on the bonds being refunded, (b) to the payment of
any interest on those refunding bonds, or (c) to any expenses
incurred in connection with the refunding, the proceeds may be
invested in obligations permitted under the bond resolution
authorizing the issuance of refunding bonds.
1063.59. The Treasurer or any other person executing the notes or
bonds shall not be subject to any personal liability or
accountability by reason of the issuance thereof.
1063.60. The department may issue negotiable bond anticipation
notes and may refund those notes from time to time. Bond anticipation
notes may be paid from the proceeds of sale of the bonds of the
department in anticipation of which they were issued. Bond
anticipation notes and agreements relating thereto and the order or
orders authorizing those notes and agreements may contain any
provisions, conditions, or limitations that a bond, agreement
relating thereto, or bond order of the department may contain.
1063.61. The state does hereby pledge to and agree with the holders
of any bonds issued under this article that the state will not limit
or alter the rights hereby vested in the department to fulfill the
terms of any agreements made with the holders thereof or in any way
impair the rights and remedies of those holders until the bonds,
together with the interest thereon, with interest on any unpaid
installments of interest, and all costs and expenses in connection
with any action or proceeding by or on behalf of those holders, are
fully met and discharged. The department is authorized to include
this pledge and agreement of the state in any agreement with the
holders of the notes or bonds.
1063.62. Bonds issued under this article shall be legal investments
in which all public officers and public bodies of this state, its
political subdivisions, all municipalities and municipal
subdivisions, all insurance companies and associations and other
persons carrying on an insurance business, all banks, bankers,
banking institutions, including savings and loan associations,
building and loan associations, trust companies, savings banks and
savings associations, investment companies and other persons carrying
on a banking business, all administrators, guardians, conservators,
executors, trustees and other fiduciaries, and all other persons
whatsoever who are now or may hereafter be authorized to invest in
bonds or in other obligations of the state, may properly and legally
invest funds, including capital, in their control or belonging to
them. The bonds may be used by those private financial institutions,
persons, or associations as security for public deposits. The bonds
are also hereby made securities which may properly and legally be
deposited with and received by all public officers and bodies of the
state or any agency or political subdivision of the state and all
municipalities and public corporations for any purpose for which the
deposit of bonds or other obligations of the state is now or may
hereafter be authorized by law, including deposits to secure public
funds.
1063.63. All or any part of the revenues from the insurance
assessments or from loan repayments by CIGA may be pledged by the
department to secure the repayment of any bonds issued under this
article and to pay costs incurred in the issuance or administration
of the bonds. Any pledge made to secure the bonds shall be valid and
binding from the time the pledge is made. The revenues pledged and
thereafter received by the department or by any trustee, depository
or custodian shall be deposited in a separate account and shall be
immediately subject to the lien of the pledge without any physical
delivery thereof or further act, and the lien of the pledge shall be
valid and binding against all parties having claims of any kind in
tort, contract, or otherwise against the department, CIGA, or the
trustee, depository, or custodian, irrespective of whether the
parties have notice thereof. The indenture or agreement by which the
pledge is created need not be recorded. All of those insurance
assessments, to the extent so pledged, are hereby continuously
appropriated for that purpose.
1063.64. The department and CIGA are each authorized to enter into
those contracts or agreements with those banks, insurers, or other
financial institutions that it determines are necessary or desirable
to improve the security and marketability of the bonds issued under
this article. Those contracts or agreements may contain an obligation
to reimburse, with interest, any of those banks, insurers, or other
financial institutions for advances used to pay the purchase price
of, or principal or interest on, the bonds. Any such reimbursement
obligation shall be payable solely from, and may be secured by a
pledge of, the revenues derived from the insurance assessments levied
for that purpose or from loan repayments by CIGA.
1063.65. The bonds shall not be, and shall state on their face that
they are not, general obligations of the department or of the state
or any political subdivision thereof, but are limited obligations of
the state.
Bonds issued under the provisions of this article shall not be
deemed to constitute a debt or liability or general obligation of the
state or any political subdivision thereof other than as provided in
this article and shall be payable solely from funds herein provided
therefor. All of the bonds and any prospectus or other printed
representation of the department concerning the bonds shall contain
on the face thereof a statement to the following effect: "Neither the
faith and credit nor the taxing power of the State of California is
pledged to the payment of the principal of, or interest on, this
bond."
The issuance of bonds under the provisions of this article shall
not directly or indirectly or contingently obligate the state or any
political subdivision thereof to levy or to pledge any form of
taxation whatever therefor or to make any appropriation for their
payment.
1063.66. Bonds issued by the department pursuant to this article,
their transfer and the income therefrom, shall be free from taxation
of every kind by the state and every city or county or other
political subdivision of the state, except inheritance and gift
taxes.
1063.67. The department is authorized and empowered to employ
financial consultants, advisers, legal counsel, and accountants as
may be necessary in its judgment in connection with the issuance and
sale of any bonds or other obligations of the department. Payment for
these services may be made out of the proceeds of the sale of the
bonds or other obligations. The department may delegate to the
Treasurer the employment of those professionals.
1063.68. The provisions of Section 10295 and Sections 10335 to
10382, inclusive, of the Public Contract Code shall not apply to
agreements entered into by the department or Treasurer in connection
with the obtaining of financing.
1063.50. The California Insurance Guarantee Association is
authorized to pay and discharge certain claims of insolvent insurers
as defined in Section 1063.1 through the collection of premiums from
its members, which amounts are limited by law and take time to assess
and collect. If a natural disaster such as a major earthquake or
fire were to occur in California, California's housing stock could be
adversely affected and there could be an immediate need for large
sums of money to pay covered claims of insolvent insurers. This
article provides for the ability of the department to issue bonds to
more expeditiously and effectively provide for the payment of covered
claims that arise as a result of a natural disaster. The bonds are
to be paid from the premiums assessed by the department or by CIGA
for those purposes. It is a public purpose and in the best interest
of the public health, safety, and general welfare of the residents of
this state to provide for the issuance of bonds by the department to
pay claimants and policyholders having covered claims against
insolvent insurers operating in this state.
1063.51. (a) The terms "member insurer," "insolvent insurer," and
"covered claims" have the meanings assigned those terms in Section
1063.1.
(b) "CIGA" means the California Insurance Guarantee Association,
established pursuant to Article 14.2 (commencing with Section 1063).
(c) "Commissioner" means the Insurance Commissioner.
(d) "Board" means the board of governors of CIGA.
(e) "Department" means the Department of Insurance.
(f) "Insurance Assessment Bond Fund" is the fund created pursuant
to Section 1063.52.
(g) "Insurance assessments" means the premiums collected by the
department or by CIGA pursuant to Section 1063.5, 1063.53, or
1063.54.
1063.52. The Insurance Assessment Bond Fund is hereby created in
the State Treasury. Proceeds from the sale of bonds issued pursuant
to this article and insurance assessments to repay bonds issued
pursuant to this article shall be deposited in the Insurance
Assessment Bond Fund.
All money in the fund is hereby continuously appropriated to the
department for the exclusive purpose of carrying out the purposes of
this part, and, notwithstanding the provisions of Chapter 2
(commencing with Section 12850) of Part 2.5 of Division 3 of Title 2
of the Government Code or the provisions of Article 2 (commencing
with Section 13320) of Chapter 3 of Part 3 of Division 3 of Title 2
of the Government Code, or the provisions of Sections 11032 and 11033
of the Government Code, application of the fund shall not be subject
to the supervision or budgetary approval of any other officer or
division of state government. The department may pledge any or all of
the moneys in the fund as security for payment of the principal of,
and interest and redemption premiums, if any, on, bonds issued
pursuant to this article, and, for that purpose or as necessary or
convenient to the accomplishment of any other purpose under this
article, may divide the fund into separate accounts.
1063.53. (a) In the event a natural disaster such as an earthquake
or fire results in covered claim obligations currently payable and
owed by the association in excess of its capacity to pay from current
funds and current premium assessments allowable under Section
1063.5, and upon a declaration of emergency by the Governor or the
President of the United States, the board, in its sole discretion,
may by resolution request the department to issue bonds pursuant to
this article to provide funds for the payment of covered claims and
expenses related thereto. Should the bonds be issued, the department
shall have the authority to levy upon member insurers insurance
assessments in the amount necessary to pay the principal of and
interest on the bonds, and to meet other requirements established by
agreements relating to the bonds. The department may enter into an
agreement with CIGA for CIGA to act as agent for the department to
collect the assessments.
The department may assume the obligation to pay the covered claims
of insolvent insurers for the purpose of paying the claims with the
proceeds of the bonds. The obligation of the department to pay claims
shall be a limited obligation payable only out of the proceeds of
the bonds. The department shall enter into an agreement with CIGA for
CIGA to act as agent of the department to adjust and administer the
payment of the claims. Premium payments collected pursuant to this
authority may only be used for servicing the bond obligations
provided for in this section and may be pledged for that purpose.
Premium assessments made pursuant to this section shall also be
subject to the surcharge provisions in Sections 1063.14 and 1063.145.
(b) In addition to the premium assessments provided for in this
section, the board in its discretion and subject to other obligations
of the association, may utilize current funds of the association,
premium assessments made under Section 1063.5, and advances or
dividends received from the liquidators of insolvent insurers to pay
the principal and interest on any bonds issued at the board's
request.
1063.54. Notwithstanding any other provision of law, the
department, in accordance with this article and at the request of the
board pursuant to Section 1063.53 may issue bonds in order to
provide for the payment of covered claims of insolvent insurers or in
order to make loans to CIGA, which moneys CIGA is hereby authorized
to borrow, to provide for the payment of covered claims of insolvent
insurers. For this purpose, the department or CIGA may levy upon
member insurers insurance assessments in the amounts necessary to pay
the principal of and interest on the bonds and to meet other
requirements established by agreements relating to the bonds. The
department shall enter into an agreement with CIGA for CIGA to act as
agent for the department to collect the assessments. The department
may assume the obligation to pay the covered claims of insolvent
insurers for the purpose of paying the claims with the proceeds of
the bonds. The obligation of the department to pay claims shall be a
limited obligation payable only out of the proceeds of the bonds. The
department shall enter into an agreement with CIGA for CIGA to act
as agent of the department to adjust and administer the payment of
claims. The total bonded indebtedness authorized pursuant to this
article shall not exceed the level that can be supported by the
revenues dedicated to retiring the bonds.
1063.55. The bonds shall be authorized by order of the
commissioner, shall be in the form, shall bear the date or dates, and
shall mature at the time or times as the order or the indenture
authorized by the order may provide, except that no bond shall mature
more than 20 years from the date of its issue. The bonds may be
issued as serial bonds or as term bonds, or as a combination thereof,
and, notwithstanding any other provision of law, the amount of
principal of, or interest on, bonds maturing at each date of maturity
need not be equal. The bonds shall bear interest at the rate or
rates, variable or fixed or a combination thereof, be in the
denominations, be in the form, either coupon or registered, carry the
registration privileges, be executed in the manner, be payable in
the medium of payment at the place or places within or without the
state, be subject to the terms of redemption, and contain the terms
and conditions as the order or indenture may provide. The bonds shall
be sold at public or private sale by the Treasurer at, above, or
below the principal amount thereof, on the terms and conditions and
for the consideration in the medium of payment that the Treasurer
shall determine prior to the sale.
1063.56. Upon receipt of an order of the commissioner authorizing
the issuance of bonds, the Treasurer shall provide for their
preparation in accordance with the order. The bonds authorized to be
issued shall be sold by the Treasurer, at public sale or at private
sale, as directed by the order. In the case of a public sale, (a) the
bonds shall be sold by the Treasurer at such times as may be fixed
by him or her, and upon such notice as he or she may deem to be
advisable, upon sealed bids, to the bidder whose bid will result in
the lowest net interest cost on account of the bonds, and (b) if no
bids are received, or if the Treasurer determines that the bids are
not satisfactory, the Treasurer may reject all bids received, if any,
and either readvertise or sell the bonds at private sale.
1063.57. The department may provide for the issuance of refunding
bonds for the purpose of refunding any bonds then outstanding which
have been issued under the provisions of this article, including the
payment of any redemption premium thereon and any interest accrued or
to accrue to the date of redemption of those bonds. The issuance of
the obligations, the maturities and other details thereof, the rights
of the holders thereof, and the rights, duties, and obligations of
the department in respect of the same shall be governed by the
provisions of this article that relate to the issuance of bonds,
insofar as those provisions may be appropriate therefor.
1063.58. Refunding bonds issued as provided in Section 1063.57 may
be sold, or exchanged for outstanding bonds issued under this article
and, if sold, the proceeds thereof may be applied, in addition to
any other authorized purposes, to the purchase, redemption, or
payment of the outstanding bonds. Pending the application of the
proceeds of the refunding bonds, with any other available moneys, (a)
to the payment of the principal, accrued interest, and any
redemption premium on the bonds being refunded, (b) to the payment of
any interest on those refunding bonds, or (c) to any expenses
incurred in connection with the refunding, the proceeds may be
invested in obligations permitted under the bond resolution
authorizing the issuance of refunding bonds.
1063.59. The Treasurer or any other person executing the notes or
bonds shall not be subject to any personal liability or
accountability by reason of the issuance thereof.
1063.60. The department may issue negotiable bond anticipation
notes and may refund those notes from time to time. Bond anticipation
notes may be paid from the proceeds of sale of the bonds of the
department in anticipation of which they were issued. Bond
anticipation notes and agreements relating thereto and the order or
orders authorizing those notes and agreements may contain any
provisions, conditions, or limitations that a bond, agreement
relating thereto, or bond order of the department may contain.
1063.61. The state does hereby pledge to and agree with the holders
of any bonds issued under this article that the state will not limit
or alter the rights hereby vested in the department to fulfill the
terms of any agreements made with the holders thereof or in any way
impair the rights and remedies of those holders until the bonds,
together with the interest thereon, with interest on any unpaid
installments of interest, and all costs and expenses in connection
with any action or proceeding by or on behalf of those holders, are
fully met and discharged. The department is authorized to include
this pledge and agreement of the state in any agreement with the
holders of the notes or bonds.
1063.62. Bonds issued under this article shall be legal investments
in which all public officers and public bodies of this state, its
political subdivisions, all municipalities and municipal
subdivisions, all insurance companies and associations and other
persons carrying on an insurance business, all banks, bankers,
banking institutions, including savings and loan associations,
building and loan associations, trust companies, savings banks and
savings associations, investment companies and other persons carrying
on a banking business, all administrators, guardians, conservators,
executors, trustees and other fiduciaries, and all other persons
whatsoever who are now or may hereafter be authorized to invest in
bonds or in other obligations of the state, may properly and legally
invest funds, including capital, in their control or belonging to
them. The bonds may be used by those private financial institutions,
persons, or associations as security for public deposits. The bonds
are also hereby made securities which may properly and legally be
deposited with and received by all public officers and bodies of the
state or any agency or political subdivision of the state and all
municipalities and public corporations for any purpose for which the
deposit of bonds or other obligations of the state is now or may
hereafter be authorized by law, including deposits to secure public
funds.
1063.63. All or any part of the revenues from the insurance
assessments or from loan repayments by CIGA may be pledged by the
department to secure the repayment of any bonds issued under this
article and to pay costs incurred in the issuance or administration
of the bonds. Any pledge made to secure the bonds shall be valid and
binding from the time the pledge is made. The revenues pledged and
thereafter received by the department or by any trustee, depository
or custodian shall be deposited in a separate account and shall be
immediately subject to the lien of the pledge without any physical
delivery thereof or further act, and the lien of the pledge shall be
valid and binding against all parties having claims of any kind in
tort, contract, or otherwise against the department, CIGA, or the
trustee, depository, or custodian, irrespective of whether the
parties have notice thereof. The indenture or agreement by which the
pledge is created need not be recorded. All of those insurance
assessments, to the extent so pledged, are hereby continuously
appropriated for that purpose.
1063.64. The department and CIGA are each authorized to enter into
those contracts or agreements with those banks, insurers, or other
financial institutions that it determines are necessary or desirable
to improve the security and marketability of the bonds issued under
this article. Those contracts or agreements may contain an obligation
to reimburse, with interest, any of those banks, insurers, or other
financial institutions for advances used to pay the purchase price
of, or principal or interest on, the bonds. Any such reimbursement
obligation shall be payable solely from, and may be secured by a
pledge of, the revenues derived from the insurance assessments levied
for that purpose or from loan repayments by CIGA.
1063.65. The bonds shall not be, and shall state on their face that
they are not, general obligations of the department or of the state
or any political subdivision thereof, but are limited obligations of
the state.
Bonds issued under the provisions of this article shall not be
deemed to constitute a debt or liability or general obligation of the
state or any political subdivision thereof other than as provided in
this article and shall be payable solely from funds herein provided
therefor. All of the bonds and any prospectus or other printed
representation of the department concerning the bonds shall contain
on the face thereof a statement to the following effect: "Neither the
faith and credit nor the taxing power of the State of California is
pledged to the payment of the principal of, or interest on, this
bond."
The issuance of bonds under the provisions of this article shall
not directly or indirectly or contingently obligate the state or any
political subdivision thereof to levy or to pledge any form of
taxation whatever therefor or to make any appropriation for their
payment.
1063.66. Bonds issued by the department pursuant to this article,
their transfer and the income therefrom, shall be free from taxation
of every kind by the state and every city or county or other
political subdivision of the state, except inheritance and gift
taxes.
1063.67. The department is authorized and empowered to employ
financial consultants, advisers, legal counsel, and accountants as
may be necessary in its judgment in connection with the issuance and
sale of any bonds or other obligations of the department. Payment for
these services may be made out of the proceeds of the sale of the
bonds or other obligations. The department may delegate to the
Treasurer the employment of those professionals.
1063.68. The provisions of Section 10295 and Sections 10335 to
10382, inclusive, of the Public Contract Code shall not apply to
agreements entered into by the department or Treasurer in connection
with the obtaining of financing.
