STAND. COM. REP. NO. 656

Honolulu, Hawaii

, 2005

RE: S.B. No. 1802

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Housing, to which was referred S.B. No. 1802 entitled:

"A BILL FOR AN ACT RELATING TO CAPTIVE INSURANCE,"

begs leave to report as follows:

The purpose of this measure is to clarify certain definitions and requirements in the captive insurance law.

The Department of Commerce and Consumer Affairs and an individual testified in support of this measure.

This measure clarifies the scope and requirements of the captive insurance law by:

(1) Replacing references to companies with references to entities in the definitions of "affiliated company", "parent", "pure captive insurance company", and "pure nonprofit captive insurance company" to reflect the law's broader application to legal entities other than companies;

(2) Providing a cross reference to the insurance code provision establishing requirements for service of process upon the Insurance Commissioner (Commissioner) as an agent for an insurer; and

(3) Repealing the prohibition on the ownership of more than ten per cent of outstanding stock by a stockholder of a risk retention captive.

Your Committee finds that these amendments provide greater clarity on the application of the captive insurance law and that the repeal of the prohibition on stock ownership eliminates a cumbersome requirement that has proven difficult to administer.

Your Committee further finds the current requirement of a triennial examination for a captive insurance company is costly for captives and may not be necessary as to those companies that are well-managed and that have undergone prior triennial examinations with no reports of adverse findings. Accordingly, your Committee has amended this measure to allow the Commissioner to conduct an examination of a captive insurance company once every five years, rather than once every three years, provided that the company has already undergone a triennial examination.

Your Committee has further amended this measure by making technical amendments for purposes of clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1802, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1802, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Housing,

____________________________

RON MENOR, Chair