Captive Insurance Co.

Authorizes the state comptroller to establish a captive insurance
company to insure the general liabilities of the State.  (SD2)

THE SENATE                              S.B. NO.           S.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 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 to read as follows:
 2      "41D-2 Responsibilities of the comptroller.(a)  The
 3 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

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

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 1     [(b)] (c)  The requirements of chapter 103D shall not apply
 2 to the acquisition of insurance by or for state agencies.
 3     [(c)] (d)  Any provision in this section to the contrary
 4 notwithstanding, the University of Hawaii (as to casualty
 5 insurance risks only), the Research Corporation of the University
 6 of Hawaii (as to casualty insurance risks only), and the public
 7 health facilities of the department of health (with respect to
 8 medical malpractice risks only) shall be exempt from the
 9 requirements of this chapter." 
10      SECTION 4.  Section 41D-8.5, Hawaii Revised Statutes, is
11 amended to read as follows:
12      "[[]41D-8.5[]]  Insurance for indemnification.  The
13 comptroller may [obtain]:
14      (1)  Obtain sufficient loss insurance to cover the liability
15           of the State that may arise from indemnity provisions
16           agreed to pursuant to section 29-15.5[.]; and
17      (2)  Obtain appropriate and sufficient reinsurance to cover
18           the liability of a captive insurance company
19           established pursuant to section 41D-2."
20      SECTION 5.  Statutory material to be repealed is bracketed.
21 New statutory material is underscored.
22      SECTION 6.  This Act shall take effect upon its approval.