Captive Insurance Company

Grants the comptroller authority to establish a captive insurance
company, which will be owned by the State, to insure the general
liabilities of state agencies pursuant to chapter 41D, Hawaii
Revised Statutes.  (HB2986 HD2)

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2        
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The purpose of this Act is to grant the state
 2 comptroller sufficient authority to establish a captive insurance
 3 company, which will be owned by the State, to insure the general
 4 liabilities of state agencies pursuant to chapter 41D, Hawaii
 5 Revised Statutes.
 6      The State currently self-insures a substantial portion of
 7 its assets, and current insurance policies already maintain
 8 deductibles between $50,000 and $3,000,000 per occurrence.  In
 9 return, the State pays nearly $5,000,000 in premiums per year.
10 The State will save money under the proposed scheme since the
11 state-owned captive insurance company will allow the State direct
12 access to the discounted premium rates available in the
13 reinsurance market.
14      SECTION 2.  Section 41D-1, Hawaii Revised Statutes, is
15 amended by adding a new definition to be appropriately inserted
16 and to read as follows:
17      ""Captive insurance company" shall have the same meaning as
18 captive insurance company in section 431:19-101."

Page 2                                                     2986
                                     H.B. NO.           H.D. 2

 1      SECTION 3.  Section 41D-2, Hawaii Revised Statutes, is
 2 amended by amending subsection (a) to read as follows:
 3      "(a)  The comptroller, through the risk manager, shall:
 4       (1) Have discretion to purchase casualty insurance for the
 5           State or state agencies, including those employees of
 6           the State who, in the comptroller's discretion, may be
 7           at risk and shall be responsible for the acquisition of
 8           all casualty insurance;
 9       (2) Have discretion to purchase property insurance for the
10           State or state agencies and shall acquire all property
11           insurance;
12       (3) Direct and manage all risk management and insurance
13           programs of the State, except for employee benefits
14           insurance and workers' compensation insurance programs
15           or as otherwise provided in chapters 87, 88, 383 to
16           386A, 392, and 393;
17       (4) Consult with state agencies to determine what property,
18           casualty, and other insurance policies are presently in
19           force or are sought by the state agencies and to make
20           determinations about whether to continue subscribing to
21           insurance policies.  In the event that the risk
22           manager's determination is not satisfactory to the
23           state agency, the state agency may have the risk
24           manager's decision reviewed by the comptroller.  In

Page 3                                                     2986
                                     H.B. NO.           H.D. 2

 1           this case, the comptroller's decision shall be final;
 2       (5) Consolidate and combine state insurance coverages, and
 3           purchase excess insurance when, in the comptroller's
 4           discretion, it is appropriate to do so;
 5       (6) Acquire risk management, investigative, claims
 6           adjustment, actuarial, and other services, except
 7           attorney's services, as may be required for the sound
 8           administration of this chapter;
 9       (7) Gather from all state agencies and maintain data
10           regarding the State's risks and casualty, property, and
11           fidelity losses;
12       (8) In conjunction with the attorney general and as
13           otherwise provided by this chapter, compromise or
14           settle claims cognizable under chapter 662;
15       (9) Provide technical services in risk management and
16           insurance to state agencies; [and]
17      (10) Be authorized to establish a captive insurance company
18           pursuant to article 19 of chapter 431 to effectuate the
19           purposes of this chapter; and
20     [(10)] (11)  Do all other things appropriate to the
21           development of sound risk management practices and
22           policies for the State."

Page 4                                                     2986
                                     H.B. NO.           H.D. 2

 1      SECTION 4.  Section 41D-6, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "[[]41D-6[]]  Fund advancement[; dissolution].  If the
 4 state risk management revolving fund should become financially
 5 incapable of meeting its obligations under this chapter, the
 6 comptroller, in the comptroller's discretion, [may:
 7      (1)  Request] shall request that the governor authorize the
 8           transfer of sufficient sums to meet the fund's
 9           obligations from whatever such savings as may be
10           available from other current appropriation for any
11           other state program.  Money so advanced shall be repaid
12           from the state risk management revolving fund in annual
13           installments, without interest.  The amount of
14           installments shall be fixed by the director of finance
15           at whatever amount as can reasonably be expected to
16           liquidate indebtedness of the fund in not more than ten
17           years[; or
18      (2)  Dissolve the fund, prorating remaining assets of the
19           fund among the claimants, giving priority to those
20           claims as, in the comptroller's discretion, is
21           appropriate]."
22      SECTION 5.  Section 41D-8.5, Hawaii Revised Statutes, is
23 amended to read as follows:

Page 5                                                     2986
                                     H.B. NO.           H.D. 2

 1      "[[]41D-8.5[]]  Insurance for indemnification.  The
 2 comptroller may [obtain]:
 3      (1)  Obtain sufficient loss insurance to cover the liability
 4           of the State that may arise from indemnity provisions
 5           agreed to pursuant to section 29-15.5[.]; and
 6      (2)  Obtain appropriate and sufficient reinsurance to cover
 7           the liability of a captive insurance company
 8           established pursuant to section 41D-2."
 9      SECTION 6.  Statutory material to be repealed is bracketed.
10 New statutory material is underscored.
11      SECTION 7.  This Act shall take effect upon its approval.