STAND. COM. REP. NO. 1415

Honolulu, Hawaii

, 2001

RE: H.B. No. 1243

H.D. 1

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred H.B. No. 1243, H.D. 1, entitled:

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

begs leave to report as follows:

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

Testimony in support of the measure was received from the Insurance Commissioner, City and County of Honolulu, Char Hamilton Campbell and Thom, Becher and Carlson Risk Management, Inc., and Pacific Century Trust.

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 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 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 further finds that the counties may be able to realize risk management cost savings through the use of a captive insurance company. Therefore, this measure has been amended to authorize the formation of captives by the counties.

Your Committee has also amended this measure by making technical, nonsubstantive amendments for the sake of clarity and to reflect preferred drafting 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 H.B. No. 1243, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1243, H.D. 1, 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