Report Title:

Hawaii Hurricane Relief Fund; Special Mortgage Recording Fee

 

Description:

Repeals special mortgage recording fee.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

1289

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to Hawaii hurricane relief fund.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The Hawaii hurricane relief fund was established to remedy a critical problem facing this community following Hurricane Iniki. Since its inception insurers have begun to return to the market, and the Hawaii hurricane relief fund has suspended some of the assessments of insurers. However, the special mortgage recording fee has not likewise been suspended by the board of directors of the Hawaii hurricane relief fund. Section 431P-5(14), Hawaii Revised Statutes, provides that the board of directors may exempt mortgage transactions from payments of the special mortgage recording fee and provide for maximum limits on or uniform reduction of the special mortgage recording fee, pursuant to rules adopted by the board. Despite this broad authorization, the rules adopted under title 16, Hawaii administrative rules, chapter 178 relating to administrative special mortgage recording fee guidelines, contain no reference to any exemption or reduction of the fee based upon the withdrawal of the Hawaii hurricane relief fund from the provision of policies.

The legislature finds that it is inappropriate that the Hawaii hurricane relief fund should continue to receive the special mortgage recording fees, while it reduces the number of policies.

The purpose of this Act is to repeal the special mortgage recording fee and require its refund.

SECTION 2. Section 431P-5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) In addition to the general powers under subsection (a), the fund shall have the specific power to:

(1) Adopt and administer a plan of operation in accordance with section 431P-7, and a manual of rules and rates to provide persons having an insurable interest in eligible property with insurance coverage provided by the fund;

(2) Authorize the provision of hurricane coverage by the fund for real property and tangible personal property located in or on real property and establish limits of liability for specific coverages within the range of authorized coverage;

(3) Adopt actuarially sound rates based on reasonable assumptions relative to expectations of hurricane frequency and severity for all coverage provided under policies or endorsements issued by the fund. Rates adopted shall be subject to approval by the commissioner pursuant to article 14 of chapter 431. Rates adopted shall provide for classification of risks and shall include past and prospective losses and expense experience in this State;

(4) Adopt procedures, guidelines, and surcharges applicable to policies of hurricane property insurance issued in connection with an underlying property policy issued by an unauthorized insurer;

(5) Adopt any form of insurance policy necessary for providing policies of hurricane property insurance by the fund, with the approval of the commissioner;

(6) Issue policies of hurricane property insurance and pay claims for coverage over the mandatory deductible or other deductible provided in the plan of operation or any manual of rules and rates adopted under the plan of operation;

(7) Require every licensed property and casualty insurer transacting direct property insurance business in this State to act as a servicing facility, and by contract with that insurer authorize the insurer to inspect eligible properties, service policies and policyholders of hurricane property insurance, provide claim services, and perform any other duties as authorized by the fund for applicants to the fund and those insured by it;

(8) (A) Assess all licensed property and casualty insurers the amounts which, together with the other assets of the fund, are sufficient to meet all necessary obligations of the fund. The assessment shall be made on the insurer's gross direct written premiums for property and casualty insurance in this State for the preceding calendar year. The rate of assessment in a year in which a covered event has not occurred shall be 3.75 per cent and shall not include the insurer's gross direct written premiums for motor vehicle insurance in this State; provided that following a covered event, the rate of assessment may be increased to an amount not to exceed five per cent and may include the insurer's gross direct written premiums for motor vehicle insurance in this State. This increase shall remain in effect until such time as all claims and other obligations, including but not limited to bonds and notes, arising out of a covered event shall have been fully discharged. An insurer authorized to provide comparable coverage under section 431P-10(b) and which is providing hurricane property insurance in the State shall be assessed an amount that excludes gross direct written premiums for property insurance in this State. The assessment for a year in which a covered event has not occurred shall be collected quarterly during each calendar year;

(B) In the event of a loss from a covered event the fund, in addition to the assessment in subparagraph (A), shall assess those insurers which acted as servicing facilities during the twelve months ending at the start of the month preceding the month in which the covered event occurs. The total assessment shall be a fixed percentage of the total coverage provided by the fund under its policies of hurricane property insurance during the month preceding the month in which the covered event occurs. The percentage to be used in calculating the total assessment shall be as follows:

(i) For calendar year 1998, a percentage as fixed by the board in the plan of operation, but in no event shall the total assessment exceed $500,000,000;

    (ii) For calendar year 1999, 1.125 per cent;

   (iii) For calendar year 2000, 1.25 per cent; and

    (iv) For calendar year 2001, and each calendar year thereafter, 1.5 per cent.

A separate total assessment shall be made for each covered event. The total assessment shall be allocated to each servicing facility based on the proportion of the total amount of the fund's gross direct written premiums for policies of hurricane property insurance serviced by each servicing facility to the total amount of the fund's gross direct written premiums for policies of hurricane property insurance, in each case, during the twelve months ending at the start of the month preceding the month in which the covered event occurs. Assessments made under this subparagraph and those under subparagraph (A) in a year in which a covered event has occurred are due from each insurer based on assessment procedures established by the fund to meet its obligations to policyholders in a timely manner; and

(C) The fund may exempt or defer, in whole or in part, the assessment of any insurer if the assessment would cause the insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority in this State;

(9) Develop a program of incentives to encourage insurers to provide policies of hurricane property insurance in the event the commissioner authorizes the provision of comparable insurance pursuant to section 431P-10(b) which may include but are not limited to exemption of the insurer's gross direct written premium for property insurance from the assessment pursuant to paragraph (8)(A);

(10) Develop a credit based on the difference between premiums written in 1993 and the premiums written in 1992 by each property insurer against the assessment for gross direct written premiums written in 1993;

(11) Develop procedures regarding policies written by unauthorized insurers comparable to the assessments, surcharges, and other contributions made by insurers authorized to do business in this State;

(12) Accumulate reserves or funds, including the investment income thereon, to be used for paying expenses, making or repaying loans or other obligations of the fund, providing loss mitigation incentives, and paying valid claims for covered events insured by the fund;

(13) Collect and maintain statistical and other data as may be required by the commissioner;

[(14) Exempt mortgage transactions from payments of the special mortgage recording fee and provide for maximum limits on or uniform reduction of the special mortgage recording fee, pursuant to rules adopted by the board;

(15)] (14) Impose fines for each incident of nonpayment of amounts due to the fund under this chapter; provided that the fines shall not exceed twenty-five per cent of the amount then due;

[(16)] (15) Create loss mitigation incentives, including but not limited to premium credits, premium rebates, loans, or cash payments;

[(17)] (16) Enter into claims financing transactions, including but not limited to reinsurance transactions, debt transactions, and other transactions incorporating elements of reinsurance, insurance, debt or equity;

[(18)] (17) Establish business and corporate entities or organizations pursuant to the purposes of this chapter; and

[(19)] (18) Perform any and all acts reasonably necessary to carry out the purposes of this chapter."

SECTION 3. Section 431P-5.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Upon written confirmation from the insurance commissioner that the director of finance has secured $500,000,000, in the aggregate, in the form of:

(1) Commitments from either the federal government or an agency of the federal government or a financial institution;

(2) Revenue bonds other than those issued or to be issued in response to the occurrence of a covered event; or

(3) A combination of the commitments or bonds;

the Hawaii hurricane relief fund shall:

(1) Control or freeze rates; and

(2) Continue accumulating premiums from policies of hurricane property insurance [and the special mortgage recording fee,] net of any reinsurance payments, operating expenses and funds necessary for the development of a comprehensive loss reduction plan."

SECTION 4. Section 431P-16, Hawaii Revised Statutes is amended to read as follows:

"§431P-16 Establishment of trust funds. (a) The fund shall establish outside the state treasury a hurricane reserve trust fund and any accounts thereunder and any other trust fund or account necessary to carry out the purposes of this chapter. Moneys deposited in the hurricane reserve trust fund and any accounts thereunder or any other trust fund or account shall be held by the fund, as trustee, in a depository as defined in section 38-1 or according to a similar arrangement at the discretion of the board, including, but not limited to, trust or custodial accounts created for the benefit of the fund's secured parties under contractual claims financing arrangements. These moneys may be invested and reinvested in accordance with the plan of operation. Disbursements from the trust funds shall not be subject to chapter 103D and shall be made in accordance with procedures adopted by the board.

[(b) The hurricane reserve trust fund shall receive deposits of the special mortgage recording fee established by this chapter. The special mortgage recording fee shall be imposed on each mortgage and each amendment to a mortgage which, in each case, increases the principal amount of the secured debt and which is recorded in the bureau of conveyances of the State under chapter 502 or filed with the assistant registrar of the land court of the State under chapter 501.

The special mortgage recording fee shall be an amount equal to one-tenth of one per cent of the stated principal amount of the debt secured by the mortgage or, in the case of an amendment or refinancing of a mortgage, an amount equal to one-tenth of one per cent of the amount of the increase of the stated principal amount of the secured debt; provided that the board may establish a lower special mortgage recording fee amount pursuant to section 431P-5(b)(14). With respect to an open end revolving loan, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the maximum amount which may be outstanding under the loan at any one time. With respect to a mortgage securing a nonmonetary or inchoate obligation, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the monetary amount which the mortgagee attributes to the obligation. If the debt is stated in a foreign currency, it shall be converted to U.S. dollars using an exchange rate published in a newspaper of general circulation in this State within one week prior to recordation of the mortgage or amendment of mortgage.

The special mortgage recording fee shall be in addition to any applicable fees under chapter 501 or 502. The special mortgage recording fee shall be submitted to and collected by the bureau of conveyances or the assistant registrar of the land court of the State and shall be deposited into the hurricane reserve trust fund. The special mortgage recording fee shall be submitted at the time the mortgage or amendment of mortgage is recorded together with any related forms or certifications required by the bureau of conveyances or the assistant registrar of the land court of the State.

(c)] (b) The Hawaii hurricane relief fund shall implement the assessments of all property and casualty insurers as authorized by section 431P-5(b)(8)(A) and (B) and the proceeds from the assessments shall be deposited into the hurricane reserve trust fund or into trust or custodial accounts, created for the benefit of the fund's secured parties, that are held inside or outside the hurricane reserve trust fund.

[(d)] (c) If the Hawaii hurricane relief fund offers to issue policies of hurricane property insurance, the premiums for the policies shall be deposited into the hurricane reserve trust fund.

[(e)] (d) After each covered event, if the board shall determine that the moneys in the hurricane reserve trust fund, excluding moneys determined by the board to be needed to continue fund operations following that covered event, will be insufficient to pay claims and other obligations of the fund arising out of that covered event, the Hawaii hurricane relief fund is authorized to levy a surcharge not to exceed seven and one-half per cent a year on premiums charged for all property and casualty insurance policies issued for risks insured in this State. These moneys may be deposited into the hurricane reserve trust fund or into trust or custodial accounts, created for the benefit of the fund's secured parties, that are held inside or outside the hurricane reserve trust fund. The formula to calculate the amount and period of the surcharge for each covered event and the procedures and methodology for payment of claims and other obligations of the fund shall be provided in the plan of operation and the surcharge may remain in effect until all claims and other obligations of the fund, including but not limited to claims financing transactions, bonds, notes, and other obligations arising out of that covered event, shall have been fully discharged. The amount and reason for any surcharge made pursuant to this subsection shall be separately stated on any billing sent to an insured. The surcharge shall not be considered premiums for any other purpose, including the computation of gross premium tax or the determination of agents' commissions.

[(f)] (e) Any proceeds, experience refunds, or other return funds under reinsurance shall be deposited into the hurricane reserve trust fund.

[(g)] (f) Any proceeds from loans or other moneys from the federal government, any proceeds from bonds issued pursuant to this chapter loaned by the director to the Hawaii hurricane relief fund, and other moneys as the State may make available from time to time shall be deposited into the hurricane reserve trust fund.

[(h)] (g) Moneys in the hurricane reserve trust fund or in trust or custodial accounts, created for the benefit of the fund's secured parties, shall be expended by the Hawaii hurricane relief fund or its authorized designee and used solely for the purposes of this chapter.

[(i)] (h) Solely upon dissolution of the Hawaii hurricane relief fund, the net moneys in the hurricane reserve trust fund shall revert to the state general fund, after any payments by the fund on behalf of licensed property and casualty insurers or the State that are required to be made pursuant to any federal disaster insurance program enacted to provide insurance or reinsurance for hurricane risks. In the event such moneys are paid on behalf of licensed property and casualty insurers, payment shall be made in proportion to the premiums from policies of hurricane property insurance serviced by the insurers in the twelve months prior to dissolution of the fund."

SECTION 5. Section 501-23.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§501-23.5[]] Disposition of fees received at the bureau of conveyances. Notwithstanding any other law to the contrary, of the fees received at the bureau of conveyances, the registrar of conveyances shall deposit to the credit of the state general fund $23 for each document recorded and shall deposit the remaining balance and all fees other than the [special mortgage recording fee established pursuant to section 431P-16 and] conveyance tax collected pursuant to section 247-1 to the credit of the bureau of conveyances special fund established under section 502-8."

SECTION 6. Section 502-25, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Notwithstanding any other law to the contrary, of the fees received at the bureau of conveyances, the registrar of conveyances shall deposit to the credit of the state general fund $23 for each document recorded and shall deposit the remaining balance and all fees other than the [special mortgage recording fee established pursuant to section 431P-16 and] conveyance tax collected pursuant to section 247-1 to the credit of the bureau of conveyances special fund established under section 502-8."

SECTION 7. All special mortgage recording fees:

(1) Deposited as of the effective date of this Act; or

(2) Collected by the bureau of conveyances or assistant registrar of the land court of the State before the effective date of this Act but deposited after the effective date of this Act;

into the hurricane reserve fund under section 431P-16, Hawaii Revised Statutes, that have not been expended to pay claims or other obligations of the fund arising out of covered events, shall be refunded to each mortgagor who has paid the special mortgage recording fee, no later than sixty days after the date of approval of this Act.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act, upon its approval, shall take effect retroactively to December 1, 2000.

INTRODUCED BY:

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