SB 1170 amends Government Code Section 990.8 and adds Section 6525.5 to authorize nonprofit housing developers to enter joint powers agreements (JPAs) with public agencies, including for the purpose of pooling self-insured claims and providing insurance-like services. The bill explicitly adds nonprofit housing developers to the list of entities that may participate in JPAs for insurance and clarifies that such arrangements can be coinsured under a master policy with prorated premiums.
The measure requires any JPA formed under this authority to protect participating public agencies from becoming liable for the JPA’s underlying debts or liabilities and to indemnify those agencies. It also restricts how a JPA may use its revenues: solely for operating expenses and for member support activities (technical support, continuing education, safety engineering, and operational and managerial advisory assistance) aimed at reducing risk and strengthening member capacity.
Those structural rules reshape how nonprofit housing developers can manage risk in partnership with the public sector and constrain the financial mechanics of new risk-pooling vehicles.
At a Glance
What It Does
Adds 'nonprofit housing developer' to the entities authorized under Section 990.8 to form JPAs that provide insurance or pool risks, and creates new Section 6525.5 permitting JPAs between nonprofit housing developers and public agencies for any common power and specifically for risk pooling. The bill requires indemnification of public agencies and bars them from being responsible for the JPA’s underlying debts.
Who It Affects
Nonprofit housing developers, local public agencies that might join or sponsor JPAs, existing public risk pools and private insurers competing in that market, and third-party administrators or consultants who run and advise pools. Lenders, grantors, and tenants of nonprofit housing projects could see second-order impacts.
Why It Matters
This opens a new, public-sector-adjacent route for nonprofit housing entities to share risk and buy insurance-like services collectively while narrowing how pooled revenues may be used. For compliance officers and insurers, it signals a new market structure and a set of legal guardrails (indemnity and revenue limits) that will determine how these pools operate and interact with existing insurance law.
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What This Bill Actually Does
SB 1170 changes two places in the Government Code to let nonprofit housing developers participate in joint powers arrangements alongside public entities for shared purposes — and specifically to join or form risk-pooling arrangements that operate similarly to public self-insurance pools. The amendment to Section 990.8 adds nonprofit housing developers to the enumerated list of entities that may provide insurance or pool self-insured claims through a JPA, and it expands the statutory list of entities eligible to be coinsured under a master policy so that premiums can be prorated among nonprofit housing developers and the other covered parties.
The new Section 6525.5 does two things. First, it confirms that nonprofit housing developers may enter JPAs with public agencies to jointly exercise any power common to them — the same broad authority long available to public agencies under the Joint Exercise of Powers Act.
Second, it creates a specific, constrained route for risk pooling: JPAs between nonprofit housing developers and public agencies may pool risks under the Section 990.8 framework only if the agreement prevents any participating public agency from becoming responsible for the JPA’s underlying debts or liabilities and contains an express indemnity protecting the public agency.The bill also controls how a risk-pooling JPA may use the money it brings in. Revenues generated through insurance or pooling activities must be spent solely on necessary operating expenses and on member-focused services: technical support, continuing education, safety engineering, and operational and managerial advisory assistance.
That limitation steers the pools toward capacity-building and loss-prevention rather than building flexible claim reserves or distributing surplus funds for broader purposes.Finally, the statutory framework preserves the existing treatment of pooled self-insurance (not being treated as insurance under the Insurance Code) and allows such pools to reinsure risks in the same manner as insurers. Practically, that means these nonprofit–public JPAs will sit in the familiar space occupied by other public risk pools: subject to public contracting rules and member governance rather than the full Insurance Code licensing regime, while still able to access reinsurance markets if they choose.
The Five Things You Need to Know
The bill amends Government Code Section 990.8 to explicitly add 'a nonprofit housing developer' to the list of entities that may provide insurance or pool self-insured claims through a joint powers agreement.
It creates Government Code Section 6525.5, which allows nonprofit housing developers to enter JPAs with public agencies to jointly exercise any power common to them and—separately—permits risk pooling between nonprofit housing developers and public agencies.
Any JPA formed for risk pooling under Section 6525.5 must ensure no participating public agency becomes responsible for the JPA’s underlying debts or liabilities and must include express indemnification protecting those agencies.
A JPA established under the risk-pooling authorization may use its revenues only for necessary operating expenses and for delivering technical support, continuing education, safety engineering, and operational/managerial advisory assistance to members to reduce risk and strengthen capacity.
Section 990.8 is recast so nonprofit housing developers can be coinsured under a master policy with other covered entities and have total premiums prorated among them.
Section-by-Section Breakdown
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Adds nonprofit housing developers to entities authorized to pool risks and be coinsured
The amendment inserts 'a nonprofit housing developer' into the statutory list of actors that may provide insurance or pool self-insured claims under the joint powers framework. It also rewrites the coinsurance/multi-entity master policy language to include nonprofit housing developers as parties eligible for coinsurance with prorated premiums. For practitioners this is mechanical but consequential: nonprofit housing developers can now join the same statutory risk-pool architecture long used by local public entities and mutual water companies.
Maintains public-pool treatment and permits reinsurance
The bill retains existing text that pooling of self-insured claims is not 'insurance' for purposes of the Insurance Code and preserves the authority to reinsure pooled liabilities 'to the same extent and the same manner as insurance provided by an insurer.' Practically, that leaves pools under public governance and contracting rules rather than primary insurance regulation, while keeping reinsurance markets available as a risk-transfer tool.
Authorizes JPAs between nonprofit housing developers and public agencies for any common power
This subsection mirrors the broad Joint Exercise of Powers Act authority but makes it explicit that nonprofit housing developers may enter JPAs with public agencies to jointly exercise any power common to them. The immediate implication is that nonprofit housing developers are no longer limited to private cooperation models if they seek public-partnership structures for development, operations, or services related to housing.
Risk-pooling authorization with indemnity and revenue-use limits
This is the operative risk-pool clause: it permits a nonprofit housing developer and public agencies to form JPAs for risk pooling under Section 990.8 but requires the agreement to (1) ensure no public agency is liable for the JPA’s underlying debts or liabilities and (2) indemnify any participating public agency against those debts and liabilities. It also mandates that revenues generated through the insurance activities be used only for necessary operating costs and for member-directed technical and managerial services aimed at reducing risk. Those two constraints—no public liability and narrow revenue uses—will shape how pools are capitalized and operated.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Nonprofit housing developers — Gain access to public-style risk pools that can lower insurance-related costs, provide shared loss-control services, and improve capacity-building through pooled technical support and training.
- Smaller or newer nonprofit developers — Can leverage collective services (safety engineering, continuing education) that they could not afford individually, reducing operational risk and improving project financeability.
- Community lenders and grantors — Face potentially lower underwriting risk when borrowers participate in a structured risk-pooling vehicle that emphasizes loss prevention and capacity building.
- Third-party administrators, consultants, and reinsurers — Stand to gain new business advising, administering, and reinsuring these hybrid public–nonprofit pools.
- Local public agencies seeking partner capacity — Can access nonprofit expertise and co-develop housing risk-management programs without taking on legal responsibility for the JPA’s debts, provided indemnities are in place.
Who Bears the Cost
- Private commercial insurers — May lose premium volume in niche markets for nonprofit housing risks as JPAs attract pools of nonprofit projects that had purchased private coverage.
- Nonprofit housing developers (administrative burden) — Must help form and operate pools that are restricted in revenue use, which increases governance, compliance, and capitalization burdens on sponsoring nonprofits.
- Participating public agencies (transactional and oversight costs) — Must negotiate indemnities, vet JPA capitalization and reserve plans, and monitor the pool to ensure public interests and fiscal safeguards are preserved.
- Small public agencies and fiscally constrained municipalities — Face legal and reputational risks if indemnities are inadequate or if the JPA’s financial controls fail, even though the statute bars agency liability for underlying debts.
- State regulators and auditors — May need to adapt oversight and auditing approaches to account for a new class of JPAs combining public governance with nonprofit membership, with potential costs for examination and enforcement.
Key Issues
The Core Tension
SB 1170 balances two competing objectives: broaden access to collective risk management and capacity-building for nonprofit housing developers, while protecting public agencies and taxpayers by preventing agency liability for pool debts. The central dilemma is that shielding public agencies (and requiring indemnities) lowers political resistance to partnerships but shifts pressure onto the JPA’s capitalization model and the nonprofit members themselves — increasing moral-hazard and enforcement questions unless the statute or implementing agreements specify concrete funding and oversight safeguards.
The bill creates useful access to public-style risk-pooling for nonprofit housing developers, but it leaves several operational and legal questions open. First, the statute does not define 'nonprofit housing developer' within the Government Code text it adds; without a clear statutory definition, parties will rely on corporate charters, IRS status, or contract language to determine eligibility, creating uncertainty for pool membership and governance.
Second, the required indemnification and bar on public agency liability address political and fiscal concerns but do not specify how indemnity will be secured or enforced — for example, whether the JPA must maintain minimum reserves, purchase stop-loss reinsurance, post surety, or adopt other credit-quality protections. That omission matters: an indemnity without funding or collateral can be legally hollow if the JPA lacks resources.
Another key tension concerns the revenue-use restriction. Directing revenues exclusively to operating costs and member capacity-building reduces the likelihood that JPAs will accumulate flexible surplus or pay dividends, but it may also constrain the JPA’s ability to build reliable claim reserves.
The text permits reinsurance, which can shift catastrophic risk outward, yet reliance on reinsurance can be expensive and raise questions about long-term affordability for smaller nonprofits. Finally, treating pools as non-insurance entities preserves the established public-pool regulatory posture but risks regulatory arbitrage: private insurers may contend that some operations look and act like insurance and should be regulated as such.
Those disputes could create litigation risk or require future statutory clarification.
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