STAND. COM. REP. NO. 1532

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 1262
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred S.B. No. 1262 entitled: 

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

begs leave to report as follows:

     The purpose of this bill is to expand the definition of
"captive insurance company" (CIC) to:

     (1)  Establish five classes of CICs, subject to specified
          minimum capital or surplus requirements that may be
          increased by the Insurance Commissioner as necessary to
          preserve solvency;

     (2)  Limit the first two classes to pure CICs and the third
          class to companies formed as association and risk
          retention CICs;

     (3)  Designate class 4 CICs as leased capital facilities
          that, as newly authorized under this proposed law, are
          allowed to be owned by persons or entities that are not
          members of the CIC;

     (4)  Designate class 5 CICs as reinsurance companies that
          are formed for the primary purpose of reinsuring
          liability, property, or life and health businesses, and
          that are not class 1 through 4 CICs;


 
 
 
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     (5)  Exempt class 3 to 5 CICs from any National Association
          of Insurance Commissioners (NAIC) risk-based capital
          reports filing requirement; and

     (6)  Subject class 4 and 5 CICs to the same one percent tax
          imposed on the gross premiums of association CICs and
          risk retention CICs, where no premium tax is otherwise
          paid to this State on those amounts.

     The Insurance Commissioner of the Department of Commerce and
Consumer Affairs testified in support of the provisions for
classes 1 to 4 CICs, but recommended deleting all provisions
affecting class 5 CICs.  Hawaii Insurers Council testified in
opposition only to those portions of the bill creating the class
5 CICs.

     Testimony in general support of this measure was presented
by J&H Marsh & McLennan Management, Inc. and by the Hawaii
Captive Insurance Council (HCIC).  HCIC also testified that it
would be willing to work further with the Insurance Commissioner
on areas of concern, and therefore would not object to deleting
provisions creating the class 5 companies in this bill.

     Your Committee recognizes that there are various issues that
require further refinement and discussion by the interested
parties, and therefore your Committee has amended this bill to
replace its contents with that of the House companion bill, H.B.
No. 1623, H.D. 1, which was passed out earlier this session by
your Committee, and your Committee has made further substantive
amendments to delete all references to the class 5 CICs.

     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 1262, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B. No.
1262, H.D. 1, and be placed on the calendar for Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Consumer
                                   Protection and Commerce,



                                   ______________________________
                                   RON MENOR, Chair