CONFERENCE COMMITTEE REP. NO.83

Honolulu, Hawaii

, 2001

RE: H.B. No. 1243

H.D. 1

S.D. 1

C.D. 1

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Conference on the disagreeing vote of the House of Representatives to the amendments proposed by the Senate in H.B. No. 1243, H.D. 1, S.D. 1, entitled:

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

having met, and after full and free discussion, has agreed to recommend and does recommend to the respective Houses the final passage of this bill in an amended form.

The purpose of this measure is to establish requirements for the formation and operation of a leased capital facility captive insurance company.

State law authorizes the establishment of a class 4 captive insurance company known as a leased capital facility. A leased capital facility is also referred to in the industry as a "protected cell" company because it allows a captive to set up cells within the company for the funding and insurance of risks of a particular insured or related group of insureds. This "protected cell" feature ensures that the assets in each cell are dedicated to pay only the insurance claims of that cell's participants, and not those of another cell's participants.

This measure establishes the framework for the establishment and operation of a leased capital facility by setting out requirements and restrictions relating to the formation of a leased capital facility, the insuring of risks other than those of the participants, the use and transfer of assets, financial accounting, financial reserves, report filings, and disclosures.

Your Committee on Conference finds that leased capital facilities have become a favored risk management mechanism for smaller insureds that want to take advantage of the benefits of a captive, but do not want to invest the time or resources required to operate their own captives. Your Committee on Conference further finds that enactment of this measure will enable Hawaii to remain competitive with other captive domiciles, such as Bermuda and Vermont, that already authorize the operation of leased capital facilities.

Your Committee on Conference has amended this bill by adhering to the amendments suggested by the Insurance Division of the Department of Commerce and Consumer Affairs that clarify within the bill that the organizers of class 4 captives are not required to use protected cells to segregate assets and liabilities, but rather are allowed the option of doing so.

Your Committee on Conference has further amended this bill by making technical, nonsubstantive amendments for purposes of style, clarity, and consistency.

As affirmed by the record of votes of the managers of your Committee on Conference that is attached to this report, your Committee on Conference is in accord with the intent and purpose of H.B. No. 1243, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Final Reading in the form attached hereto as H.B. No. 1243, H.D. 1, S.D. 1, C.D. 1.

 

Respectfully submitted on behalf of the managers:

ON THE PART OF THE SENATE

ON THE PART OF THE HOUSE

____________________________

RON MENOR, Chair

____________________________

KENNETH T. HIRAKI, Co-Chair

____________________________

NATHAN SUZUKI, Co-Chair