Cal. Code Regs. tit. 10 § 2648.5

Current through Register 2025 Notice Reg. No. 2, January 10, 2025

Section 2648.5 - Pre-Application Required Information Determination ("PRID") Procedure

(a) Definitions.

As used in this section, each of the following terms has the meaning set forth below:

(1) "Pre-application required information determination" or "PRID" means a nonadjudicative initial determination the California Department of Insurance issues before an insurer submits a complete rate application and that specifies all information and data regarding a model that are required to be provided to the Commissioner as part of a complete rate application that relies upon the model for purposes of requesting a proposed rate change pursuant to Insurance Code section 1861.05.

(2) "Pre-application required information determination procedure" or "PRID procedure" means a nonadjudicative initial procedure before the California Department of Insurance that takes place before an insurer submits a complete rate application and the purpose of which is to make an initial determination of all information and data regarding a model that are required to be provided to the Commissioner as part of a complete rate application that relies upon the model for purposes of requesting a proposed rate change pursuant to Insurance Code section 1861.05.

(3) The term "model" means any simplified representation of relationships among real world variables, entities, responses, actions, or events using appropriate statistical, financial, economic, mathematical, non-quantitative, or scientific concepts and equations, or any combination thereof, and that consists of three components: one or more information input components, which deliver data and assumptions to the model; one or more processing components, which transform input into output; and one or more results components, which translate the output into useful business information. Types of models include, without limitation, "catastrophe risk models," "complex catastrophe models," "probabilistic catastrophe models," "third-party models," "wildfire models," "wildfire risk models," "risk models," and models referencing other perils; the meaning of the term "model" also includes without limitation a "Wildfire Risk Model" as described in Section 2644.9, subdivision (b)(6)(A).

(4) "Required model information" means all required information and data regarding a model, that the Commissioner requires to be submitted as part of a complete rate application that relies upon the model, because such information and data will aid the Commissioner in determining whether the model is reliable to perform the functions for which an insurer proposes to use the model, for purposes of the Commissioner's evaluation of a complete rate application.

(5) "Complete rate application" means an application submitted by an insurer desiring to change any property and casualty rate pursuant to Insurance Code section 1861.05 and shall include without limitation all required model information and all information and data specified in Section 2648.4, regardless of whether any such information and data is included in its initial complete rate application submission or is subsequently submitted as part of the rate proceeding, including without limitation in response to requests for further information and data by the Department.

(6) "Public information" means all information provided to the Commissioner as part of a complete rate application submitted pursuant to article 10 of division 1, part 2, chapter 9 of the Insurance Code.

(7) "Confidential PRID information" means information, data, testimony, evidence, hearings, briefs, pleadings, correspondence, discovery, working papers, and other material created or exchanged for purposes of a PRID procedure, and that are not included in any complete rate application subsequently submitted or otherwise provided to the Commissioner.

(8) "Model Advisor" means the person within the Department of Insurance who oversees a PRID procedure.

(b) For purposes of determining appropriate rates for a property and casualty line of business, the Commissioner requires insurers seeking to rely upon modeled information, including without limitation modeled financial projections such as aggregate catastrophe loss projections and other types of projected losses, to submit all required model information as part of a complete rate application. Required model information shall include, in addition to any information specified in the complete rate application requirements set forth in Section 2648.4, information that demonstrates the model uses established concepts, data, equations, and principles, as well as best available scientific information and data, insurance claims expertise, and other assumptions appropriate for the risk or peril being modeled.

(c) The purpose of a pre-application required information determination procedure or PRID procedure shall be for the Department of Insurance to issue a PRID that specifies all required model information to be included in a complete rate application that relies upon the model. The purpose of the PRID procedure shall not be to determine how a specific model shall apply in any particular complete rate application, nor shall the parties examine any nonaggregated insurer-specific information as part of the PRID procedure.

(d) Required model information specified in a PRID shall not be provided to the Commissioner and shall not be public information until or unless an insurer subsequently submits a complete rate application to the Commissioner that relies upon the model.

(e) Confidential PRID information shall not be public information and shall be considered to be information received in official confidence by the Department of Insurance. Accordingly, confidential PRID information shall not be subject to disclosure in response to requests pursuant to the California Public Records Act (commencing with Government Code section 7920.000).

(f) The Commissioner shall delegate authority to oversee a PRID procedure and issue a pre-application required information determination to the Model Advisor. The Model Advisor is authorized to hire outside consultant(s) with relevant knowledge and subject matter expertise to assist in determining required model information.

(g) The Department of Insurance may initiate a PRID procedure by submitting a notice of PRID procedure to the Model Advisor.

(h) Any person other than the Department may petition to initiate a PRID procedure, or petition to participate in a PRID procedure, by following the procedure set forth in Section 2661.4. The procedures for awarding advocacy fees, witness fees and other expenses to participants shall be subject to Insurance Code section 1861.10, Sections 2661.1 through 2662.8, and this section. A petition to initiate a PRID procedure may be combined with a petition to participate in a PRID procedure.

(1) The Model Advisor shall provide public notice of the Department's notice of PRID procedure, or a petition to initiate a PRID procedure, within three business days after receiving the notice or petition.

(2) Any person may submit to the Model Advisor a response to the petition, no later than three business days after public notice of the petition to initiate a PRID procedure.

(3) The Model Advisor shall grant the petition to initiate a PRID procedure only if the Model Advisor determines that the petitioner has demonstrated it is more likely than not that the Commissioner would benefit from a PRID and either of the following conditions exist:

(i) there is no currently valid PRID under this section; or

(ii) the model has not previously been subject to public review in any other forum in California, including without limitation as part of a complete rate application, within the prior four years.

(4) The Model Advisor shall rule on a petition to initiate the PRID procedure, a petition to participate in a PRID procedure, or a combined petition, within 10 business days after receipt of the petition by the Model Advisor.

(5) The owner or vendor of a model may decline to participate as a party in a PRID procedure as to that model, but shall provide witness testimony, documents, and other information in response to subpoena.

(6) For purposes of a request for an award of compensation based upon participation in a PRID procedure, the following additional standards shall apply:

(A) A party may not request compensation for fees and expenses based upon work that unnecessarily duplicates the work of another party. Work that materially supplements, complements, or contributes to the substantial contribution of another party shall not be considered unnecessarily duplicative.

(B) To the extent the substantial contribution claimed by a participant duplicates the substantial contribution of another party to the PRID procedure, the decision awarding compensation may find that neither party has made a substantial contribution.

(C) An insurer that relies upon a PRID when submitting a complete rate application to the Department shall provide notice to all participants in the PRID procedure that led to the PRID upon which the insurer relies, no later than two business days after submission of the complete rate application. Any participant intending to request compensation for reasonable fees and expenses incurred in the PRID procedure preceding the complete rate application shall provide notice of such intent to all parties in the PRID procedure, no later than five business days after the insurer provides notice of submission of the complete rate application.

(D) A participant in a PRID procedure who intends to request an award of compensation shall submit a request only after the resolution of a complete rate application relying upon the PRID. The Model Advisor's issuance of the PRID shall not be deemed an order, decision, or other action of the Commissioner within the meaning of section 2662.3. A participant to a PRID procedure need not intervene or participate in the complete rate application proceeding relying upon the PRID in order to request an award of compensation for reasonable fees and expenses arising out of participation in the PRID procedure, Section 2662.3 notwithstanding. The request for an award of compensation shall delineate fees and expenses incurred in the PRID procedure separately from any fees and expenses that may have been incurred in the complete rate application proceeding.

(E) Any compensation award shall be payable by the insurer that submitted the complete rate application relying upon the PRID. The insurer may pass on the cost of the award to the owner or vendor of the model for which the PRID was issued. The award shall not be treated as an expense for the purpose of establishing rates of the insurer, Section 2662.6(d) notwithstanding.

(F) Once a party to a PRID procedure has been awarded its reasonable fees and expenses incurred in the procedure following a complete rate application that relied upon the PRID, it shall not be entitled to further compensation awards based upon the same fees and expenses incurred in the PRID procedure in any other complete rate application that relies upon the same PRID.

(i) The Model Advisor shall publicly notice a PRID procedure within three (3) business days after granting a petition to initiate a PRID procedure or a Notice of PRID Procedure from the Department. Petitions to participate shall be considered timely if submitted within five (5) business days after the Model Advisor issues public notice of the PRID procedure. The PRID procedure shall be initiated five (5) business days after the Model Advisor has issued a ruling granting any petition to participate in the PRID procedure.

(j) No later than 15 business days after a PRID procedure has been initiated, all parties to a PRID procedure under this section shall:

(1) File a statement with the Model Advisor. The statement shall describe how the parties will avoid duplication and shall disclose without limitation working agreements among the parties, lead counsel arrangements on certain issues, sharing of expert witnesses among the parties, and intent to file joint documents. The statement shall also disclose any commercial interests a party has related to the model at issue in the PRID procedure, including without limitation any involvement in the ownership, development, or marketing of competing models; and

(2) Enter into a stipulated nondisclosure agreement that shall only govern the treatment of all confidential PRID information. The agreement shall specify, at a minimum, that (i) the representatives of the parties that participate in the PRID procedure shall not share any confidential PRID information with any other person, including without limitation persons employed by the same party but not involved in the PRID procedure; and (ii) the parties that participate in the PRID procedure shall return or destroy all confidential PRID information within an agreed-upon length of time after a PRID has been issued. After all parties have entered into the agreement, the parties shall submit a stipulation and proposed protective order based upon the parties' nondisclosure agreement to the Model Advisor for review. Alternatively, if the parties are unable to agree upon a stipulated nondisclosure agreement, any party may, no later than the fifteenth business day after the initiation of the PRID procedure as determined pursuant to Subdivision (h), submit a proposed protective order to the Model Advisor. No later than 10 business days after a proposed protective order has been received by the Model Advisor, the Model Advisor shall determine whether there is a significant public interest in the non-disclosure of confidential PRID information, and, upon a finding there is, enter an order thereon. Following the conclusion of the PRID procedure, the Model Advisor shall retain jurisdiction to enforce the terms of the protective order.

(3) Unless a party is the Department of Insurance or demonstrates that it represents the interests of consumers, the Model Advisor may, upon a finding that the disclosure of certain confidential PRID information to such non-Department or nonconsumer party would cause irreparable harm to the owner or vendor of the model, enter an order specifying the confidential PRID information that party shall not receive.

(k) To the extent not otherwise specified herein, the Model Advisor may, without limitation: control the course of the PRID procedure; grant or deny a petition to initiate or participate in the PRID procedure; administer oaths; issue subpoenas; rule on motions to compel discovery; receive evidence and testimony; upon notice, hold appropriate conferences before and during the procedure; rule upon procedural objections or motions; receive offers of proof; hear argument; and fix the time and place for the filing of any briefs.

(l) During a PRID procedure, all parties may propound discovery on the owner or vendor of the model to provide information and data regarding the model, including the production of documents and testimony. The parties shall not otherwise engage in discovery.

(m) During a PRID procedure, any party may proffer expert testimony and cross-examine other parties' experts regarding the reliability of the model and what constitutes required model information.

(n) The terms of the confidentiality order notwithstanding, the inclusion of any required model information in a subsequent complete rate application proceeding shall make such information public information.

(o) In a complete rate application that is submitted by an insurer subsequent to a PRID procedure, any person may rely upon the PRID to determine what is required model information. A PRID is not specific to any one complete rate application but may be relied upon in multiple complete rate applications by unaffiliated insurers. A PRID shall be valid in any complete rate application proceeding relying upon that model through the four-year anniversary date of its issuance, provided that the model has not been substantively updated, amended, altered, or changed subsequent to the issuance of the PRID. The validity of a PRID shall be determined as of the date of the submission of the complete rate application relying upon the PRID.

(p) In the event a model is substantively updated, amended, altered, or changed subsequent to the issuance of a PRID but prior to the submission of a complete rate application using or relying upon the model as substantively updated, amended, altered, or changed, then (i) the original PRID is no longer valid for purposes of determining required model information, and (ii) any party may initiate or participate in, pursuant to this section, a subsequent PRID procedure limited to the issue of whether and how the prior PRID should be substantively updated, amended, altered, or changed.

(q) The PRID procedure shall stand submitted when the Model Advisor closes the record. The Model Advisor shall close the record no later than 90 business days after issuing the confidentiality order specified in this Section unless all parties agree or the Model Advisor determines there is good cause to keep the record open. The Model Advisor shall issue a pre-application required information determination that specifies all required model information within 15 business days after the PRID procedure is submitted.

(r) As an alternative to issuing a PRID, the Model Advisor may issue a declination to specify a set of required model information after a PRID procedure, if the Model Advisor determines that (1) there is no set of required model information that could reasonably be relied upon to support the use and inclusion of any of the modeled financial projections, modeled catastrophe adjustments, modeled projected losses, or any other type of modeled loss outputs and projections for purposes of reviewing an insurer's complete rate application, or (2) there is good cause to conclude the PRID procedure without issuing a PRID. In the event the Model Advisor declines to specify a set of required model information, any insurer may still seek to rely upon the model in a subsequent complete rate application but shall publicly produce any information and data the Commissioner requires regarding that model as part of the complete rate application.

(s) At any time prior to the Model Advisor issuing a PRID, the parties to a PRID procedure may stipulate to a set of required model information. The parties shall submit any such stipulation and a proposed set of required model information to the Model Advisor for review. No later than 15 business days after submission of the stipulation and proposed set of required model information, the Model Advisor shall determine whether the proposed required model information satisfies the standards set forth herein and issue an order either adopting or declining to adopt the proposed set of required model information as the PRID for that model.

(t) A PRID shall be subject to judicial review as part of the Commissioner's decision on a complete rate application relying upon the PRID, in accordance with Insurance Code sections 1858.6 and 1861.09. For purposes of judicial review, no determination, declination, or other action by the Model Advisor shall be considered a final determination, ruling, finding, rule, decision or order of the Commissioner.

(u) Any Department costs associated with a PRID procedure shall be construed to be administrative and operational costs arising from the provisions of article 10 of division 1, part 2, chapter 9 of the Insurance Code.

(v) Nothing in this section shall be construed as prohibiting the creation of a publicly available model for use in projecting annual aggregate catastrophe losses.

Cal. Code Regs. Tit. 10, § 2648.5

Note: Authority cited: Sections 1850.4, 1858.6, 1861.01, 1861.05, 1861.07, 1861.09, 1861.10 and 12924, Insurance Code; Sections 7922.630, 7927.705, 11415.50 and 11415.60, Government Code; and 20th Century v. Garamendi, 8 Cal.4th 216 (1994). Reference: Sections 7, 1077.3, 1850.4, 1858.6, 1861.01, 1861.05, 1861.07, 1861.08, 1861.09, 1861.10, 12919 and 12921, Insurance Code; Sections 7922.630, 7929.000, 11415.50, 11415.60, 11507.6, 11507.7 and 11513, Government Code; Sections 350, 351, 352 and 1040, Evidence Code; Calfarm Insurance Company v. Deukmejian (1989) 48 Cal.3d 805; and State Farm Mutual Automobile Ins. Co. v. Garamendi, 32 Cal.4th 1029 (2004).

1. New section filed 12-12-2024 pursuant to Government Code section 11343.8; operative 12/12/2024. Submitted to OAL for filing and printing only pursuant to Government Code section 11340.9(g) (Register 2024, No. 50).