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House IBL committee hears bill to transfer State Fire and Tornado Fund from Insurance Commissioner to OMB
Summary
Representative Emily O’Brien introduced House Bill 1027 to the Industry, Business and Labor Committee seeking to move administration of the State Fire and Tornado Fund from the Insurance Commissioner to the Office of Management and Budget, citing conflicts of interest and administrative capacity concerns.
Representative Emily O’Brien introduced House Bill 1027 on behalf of the Industry, Business and Labor Committee, asking members to consider transferring administration of the State Fire and Tornado Fund from the Insurance Commissioner to the Office of Management and Budget (OMB). The bill would update statutory references, require a two‑year contract for administrative services, and move authority over day‑to‑day administration from the Insurance Department to OMB.
The bill stems from an interim study authorized in earlier sessions that examined whether administration should move from the Insurance Commissioner to OMB. O’Brien told the committee the study “must include an analysis of statutory changes necessary to facilitate the Office of Management and Budget administration of these funds,” and she said the bill reflects technical and corrective changes to effect that transfer.
Deputy Insurance Commissioner John Arnold told the committee the Insurance Department supports the transfer. “We view this as a continuation of what Commissioner Godfried initiated with the legislature in 2019 to allow for the contracting out of the administration of the Fund, due to the conflicts that we believe existed,” Arnold said. He added, “we just weren't very good at administering the Fund” when the department operated it directly and cited the department’s prior reduction of three FTEs when administration was contracted in 2019.
Arnold described two central concerns that the bill attempts to resolve. First, the department regulates entities (including the contractor that administers the fund) while also contracting for their services, which he described as a conflict of interest: negotiating contracts with entities the department regulates creates competing incentives. Second, the department had limited staff and capacity to carry out property assessments, claims processing, and other administration tasks previously handled in‑house.
Tog Anderson, director of OMB’s Risk Management Division, testified that OMB’s position is neutral and that the day‑to‑day administrative work is already handled under a statutory contract by the current contractor. He warned the committee that OMB currently lacks staff to take over direct administration if the existing contractual relationship ended and urged that statutory language be drafted so the contractor relationship continues uninterrupted if the law changes. Anderson said the department and OMB have indicated privately that the North Dakota Insurance Reserve Fund (the current contractor) is the only cost‑effective entity with the agent network and underwriting capacity to administer the fund on behalf of political subdivisions.
Committee members asked whether the change would materially affect the fund’s fiscal picture. Representative questions focused on the bill’s fiscal note and whether OMB has the staff. O’Brien pointed the committee to a fiscal note supplied by OMB and reiterated that Section 3 of the bill authorizes OMB to contract for administrative services. Deputy Commissioner Arnold confirmed the fund pays contractor fees from the fund itself and that the Insurance Department’s budget is not the primary source of those administrative payments.
The hearing was recessed to allow more testimony and follow‑up; no final committee vote on HB 1027 was recorded during the session excerpted here.
Why it matters: the State Fire and Tornado Fund insures public buildings and permanent fixtures for political subdivisions and state agencies; moving administration affects who negotiates contracts, who monitors performance, and how perceived regulatory conflicts are avoided. The bill would preserve continuing appropriation authority while moving administrative responsibility and explicitly authorizes OMB to contract for services required to operate the fund.
What’s next: committee members requested additional documentation and clarification of fiscal impacts and contract language before taking further action; the committee recessed the hearing and planned to reconvene for additional testimony.
