Captive Insurance Co.

Gives the state comptroller the authority to establish a captive
insurance company to insure the general liabilities of the State.

THE SENATE                              S.B. NO.           
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 in order to insure the
 4 general liabilities of state agencies pursuant to chapter 41D,
 5 Hawaii 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 has in section 431:19-101."
19      SECTION 3.  Section 41D-2, Hawaii Revised Statutes, is

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

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 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)  Establish a captive insurance company pursuant to
18           article 19 of chapter 431, in order to effectuate the
19           purposes of this chapter; and
20     (11)  Do all other things appropriate to the development of
21           sound risk management practices and policies for the
22           State."
23      SECTION 4.  Section 41D-6, Hawaii Revised Statutes, is

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

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