REPORT TITLE:
Insurance Consolidating Laws


DESCRIPTION:
Consolidates laws and rules governing insurance.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2473
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Purpose.  The purpose of this Act is to place
 
 2 certain provisions adopted as Hawaii Administrative Rules
 
 3 regarding insurance into the Hawaii Revised Statutes.  Currently,
 
 4 provisions governing insurance are found both within the Hawaii
 
 5 Revised Statutes and the Hawaii Administrative Rules.
 
 6      This Act places portions of current insurance administrative
 
 7 rules properly within the Hawaii Revised Statutes. This Act
 
 8 streamlines insurance administration within the State by
 
 9 consolidating certain regulatory provisions into one location.
 
10      The affected administrative rules include: 16 sections of
 
11 chapter 16-1 (Proxies, Consents, and Authorizations of Domestic
 
12 Stock Insurers); 2 sections of chapter 16-5 (Mass Merchandising
 
13 of Motor Vehicle Insurance); 3 sections of chapter 16-14
 
14 (Insurance Holding Company System); and 13 sections of chapter
 
15 16-23 (Motor Vehicle Insurance Law).
 
16      SECTION 2.  Chapter 431, Hawaii Revised Statutes, is amended
 
17 by adding to article 4 a new part to be appropriately designated
 
18 and to read as follows:
 

 
Page 2                                                     2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1    "PART  .  PROXIES, CONSENTS, AND AUTHORIZATIONS OF DOMESTIC
 
 2                          STOCK INSURERS
 
 3      431:4-A  Applicability.  This part is applicable to all
 
 4 domestic stock insurers having one hundred or more stockholders;
 
 5 provided that this part shall not apply to any insurer if ninety-
 
 6 five per cent or more of its stock is owned or controlled by a
 
 7 parent or an affiliated insurer and the remaining shares are held
 
 8 by less than five hundred stockholders.  A domestic stock insurer
 
 9 that files with the Securities and Exchange Commission forms of
 
10 proxies, consents, and authorizations complying with the
 
11 requirements of the Securities Exchange Act of 1934 (15 U.S.C.
 
12 section 78a), the Securities and Exchange Acts Amendments of 1964
 
13 (P.L. No. 88-467), and Regulation X-14 of the Securities and
 
14 Exchange Commission adopted thereunder shall be exempt from the
 
15 provisions of this part.
 
16      §431:4-B  Proxies, consents, and authorizations.  No
 
17 domestic stock insurer, or any director, officer, or employee of
 
18 the insurer, or any other person, shall solicit, or permit the
 
19 use of the person's name to solicit, by mail or otherwise, any
 
20 proxy, consent, or authorization with respect to any stock of the
 
21 insurer in contravention of this part or schedule A and schedule
 
22 B.
 

 
 
 
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 1      §431:4-C  Exhibits.  Schedules A and B and the exhibit
 
 2 entitled "stockholders information supplement-financial reporting
 
 3 to stockholder" shall be made on forms or in a format approved by
 
 4 the commissioner.
 
 5      §431:4-D  Disclosure of equivalent information.  Unless
 
 6 proxies, consents, or authorizations with respect to a stock of a
 
 7 domestic insurer, subject to section 431:4-A, are solicited by or
 
 8 on behalf of the management of the insurer from the holders of
 
 9 record of stock of the insurer in accordance with this part and
 
10 the schedules thereunder prior to any annual or other meeting,
 
11 the insurer shall file with the insurance commissioner, and
 
12 transmit to all stockholders of record, information,
 
13 substantially equivalent to the information which would be
 
14 required to be transmitted if a solicitation were made.
 
15      §431:4-E  Definitions.  As used in this part:
 
16      "Solicit" and "solicitation" shall include:
 
17      (1)  Any request for a proxy, whether or not accompanied by
 
18           or included in a form of proxy;
 
19      (2)  Any request to execute or not to execute, or to revoke
 
20           a proxy; or
 
21      (3)  The furnishing of a proxy or other communication to
 
22           stockholders under circumstances reasonably calculated
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           to result in the procurement, withholding, or
 
 2           revocation of a proxy.
 
 3      "Solicit" and "solicitation" shall not include:
 
 4      (1)  Any solicitation by a person in respect to stock of
 
 5           which the person is the beneficial owner;
 
 6      (2)  Action by a broker or other person in respect to stock
 
 7           carried in the person's name;
 
 8      (3)  Action in the name of the nominee in forwarding to the
 
 9           beneficial owner of such stock, soliciting material
 
10           received from the company;
 
11      (4)  Impartially instructing such beneficial owner to
 
12           forward a proxy to the person, if any, to whom the
 
13           beneficial owner desires to give a proxy;
 
14      (5)  Impartially requesting instructions from the beneficial
 
15           owner with respect to the authority to be conferred by
 
16           the proxy and stating that a proxy will be given if the
 
17           instructions are received by a certain date; or
 
18      (6)  The furnishing of a form of proxy to a stockholder upon
 
19           the unsolicited request of the stockholder, or the
 
20           performance by any person of ministerial acts on behalf
 
21           of a person soliciting a proxy.
 
22      "Participant" and "participant in a solicitation" shall
 
23 include:
 

 
Page 5                                                     2473
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 1      (1)  The insurer;
 
 2      (2)  Any director of the insurer and any proxy for a nominee
 
 3           for whom an election as a director is solicited; or
 
 4      (3)  Any other person acting alone or with one or more other
 
 5           persons, committees, or groups in organizing,
 
 6           directing, or financing the solicitation.
 
 7      "Participant" and "participant in a solicitation" do not
 
 8 include:
 
 9      (1)  A bank, broker, or dealer who, in the ordinary course
 
10           of business, lends money or executes orders for the
 
11           purchase or sale of stock and who is not otherwise a
 
12           participant;
 
13      (2)  Any person or organization retained or employed by a
 
14           participant to solicit stockholders or any person who
 
15           merely transmits proxy soliciting material or performs
 
16           ministerial or clerical duties;
 
17      (3)  Any person employed in the capacity of attorney,
 
18           accountant, or advertising, public relations, or
 
19           financial advisor, and whose activities are limited to
 
20           the performance of the person's duties in the course of
 
21           the employment of the insurer or any of its
 
22           subsidiaries or affiliates who is not otherwise a
 
23           participant;
 

 
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 1      (4)  Any person regularly employed as an officer or employee
 
 2           of the insurer or any of its subsidiaries or affiliates
 
 3           who is not otherwise a participant; or
 
 4      (5)  Any officer, director, or person regularly employed by
 
 5           any other participant, if the officer, director, or
 
 6           employee is not otherwise a participant.
 
 7      §431:4-F  Information to be furnished to stockholders.(a)
 
 8 No solicitation shall be made unless the person solicited is
 
 9 concurrently furnished or has previously been furnished with a
 
10 written proxy statement containing the information in schedule A.
 
11      (b)  If the solicitation is made on behalf of the management
 
12 of the insurer and relates to an annual meeting of stockholders
 
13 at which directors are to be elected, each proxy statement
 
14 furnished pursuant to subsection (a) shall be accompanied or
 
15 preceded by an annual report (in preliminary or final form) to
 
16 the stockholders containing the financial statements for the last
 
17 fiscal year as are included in the insurance division's exhibit
 
18 entitled "stockholders information supplement-financial reporting
 
19 to stockholder".  Subject to these requirements with respect to
 
20 financial statements, the annual report to stockholders may be in
 
21 any form deemed suitable by the management.
 
22      (c)  Two copies of each report sent to the stockholders
 
23 pursuant to this part shall be mailed to the insurance
 

 
Page 7                                                     2473
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 1 commissioner not later than the date on which the report is first
 
 2 sent or given to stockholders or the date on which preliminary
 
 3 copies of solicitation are filed with the insurance commissioner,
 
 4 pursuant to section 431:4-H(a), whichever date is later.
 
 5      §431:4-G  Requirements as to proxy.  (a)  The form of proxy
 
 6 shall:
 
 7      (1)  Indicate in boldface type whether or not the proxy is
 
 8           solicited on behalf of the management;
 
 9      (2)  Provide a specifically designated blank space for
 
10           dating the proxy; and
 
11      (3)  Identify clearly and impartially each matter or group
 
12           of related matters intended to be acted upon, whether
 
13           proposed by the management, or stockholders.  No
 
14           reference need be made to proposals as to which
 
15           discretionary authority is conferred pursuant to
 
16           subsection (c).
 
17      (b)  Means shall be provided in the proxy for the person
 
18 solicited to specify by ballot a choice between approval or
 
19 disapproval of each matter or group of related matters referred
 
20 to therein, other than elections to office.  A proxy may confer
 
21 discretionary authority with respect to matters as to which a
 
22 choice is not so specified if the form of proxy states in
 
23 boldface type how it is intended to vote the shares or
 
24 authorization represented by the proxy in each case.
 

 
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 1      (c)  A proxy may confer discretionary authority with respect
 
 2 to other matters which may come before the meeting, provided the
 
 3 persons on whose behalf the solicitation is made are not aware a
 
 4 reasonable time prior to the time the solicitation is made that
 
 5 any other matters are to be presented for action at the meeting
 
 6 and provided that a specific statement to that effect is made in
 
 7 the proxy statement or in the form of proxy.
 
 8      (d)  No proxy shall confer authority to:
 
 9      (1)  Vote for the election of any person to office for which
 
10           a bona fide nominee is not named in the proxy
 
11           statement; or
 
12      (2)  Vote at any annual meeting other than the next annual
 
13           meeting (or any adjournment thereof) to be held after
 
14           the date on which the proxy statement and form of proxy
 
15           are first sent or given to stockholders.
 
16      (e)  The proxy statement or form of proxy shall provide,
 
17 subject to reasonable specified conditions, that the proxy will
 
18 be voted and that where the person solicited specifies, by means
 
19 of a ballot provided pursuant to subsection (b), a choice with
 
20 respect to any matter to be acted upon, the vote will be in
 
21 accordance with the specification so made.
 
22      (f)  The information included in the proxy statement shall
 
23 be clearly presented and the statement made shall be divided into
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 groups according to subject matter, with appropriate headings.
 
 2 All printed proxy statements shall be clearly and legibly
 
 3 presented.
 
 4      §431:4-H  Material required to be filed.  (a)  Two
 
 5 preliminary copies of the proxy statement and form of proxy and
 
 6 any other soliciting material to be furnished to stockholders
 
 7 concurrently therewith shall be filed with the insurance
 
 8 commissioner at least ten days prior to the date definitive
 
 9 copies of the material are first sent or given to stockholders,
 
10 or a shorter period prior to that date as the insurance
 
11 commissioner may authorize upon a showing of good cause.
 
12      (b)  Two preliminary copies of any additional soliciting
 
13 material relating to the same meeting or subject matter to be
 
14 furnished to stockholders subsequent to the proxy statements
 
15 shall be filed with the insurance commissioner at least two days
 
16 (exclusive of Saturdays, Sundays, or holidays) prior to the date
 
17 copies of this material are first sent or given to stockholders
 
18 or a shorter period prior to such date as the insurance
 
19 commissioner may authorize upon a showing of good cause.
 
20      (c)  Two definitive copies of the proxy statement, form of
 
21 proxy, and all other soliciting material, in the form in which
 
22 this material is furnished to stockholders, shall be filed with,
 
23 or mailed for filing to, the insurance commissioner not later
 

 
Page 10                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 than the date the material is first sent or given to the
 
 2 stockholders.
 
 3      (d)  Where any proxy statement, form of proxy, or other
 
 4 material filed pursuant to this chapter is amended or revised,
 
 5 two of the copies shall be marked to clearly show the changes.
 
 6      (e)  Copies of replies to inquiries from stockholders
 
 7 requesting further information and copies of communications which
 
 8 do no more than request that forms of proxy theretofore solicited
 
 9 be signed and returned need not be filed pursuant to this part.
 
10      (f)  Notwithstanding the provisions of subsections (a) and
 
11 (b), and section 431:4-M, copies of soliciting material in the
 
12 form of speeches, press releases, and radio or television scripts
 
13 may be filed with the insurance commissioner prior to use or
 
14 publication.  Definitive copies, however, shall be filed with or
 
15 mailed for filing to the insurance commissioner as required by
 
16 subsection (c) not later than the date the material is used or
 
17 published.  The provisions of subsections (a) and (b) and section
 
18 431:4-M shall apply to any reprints or reproductions of all or
 
19 any part of the material.
 
20      §431:4-I  False or misleading statements.  No solicitation
 
21 subject to this part shall be made by means of any proxy
 
22 statement, form of proxy, notice of meeting, or other
 
23 communication, written or oral, containing any statement which at
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 the time and in the light of the circumstances under which it is
 
 2 made, is false or misleading with respect to any material fact,
 
 3 or which omits to state any material fact necessary in order to
 
 4 make the statements therein not false or misleading or necessary
 
 5 to correct any statement in any earlier communication with
 
 6 respect to the solicitation of a proxy for the same meeting or
 
 7 subject matter which has become false or misleading.
 
 8      §431:4-J  Prohibition of certain solicitations.  No person
 
 9 making a solicitation shall solicit any undated or postdated
 
10 proxy or any proxy which provides that it shall be deemed to be
 
11 dated as of any date subsequent to the date on which it is signed
 
12 by the stockholder.
 
13      §431:4-K  Election contests; applicability.  This part shall
 
14 apply to any solicitation by any person or group for the purpose
 
15 of opposing a solicitation by any person or group with respect to
 
16 the election or removal of directors at any annual or special
 
17 meeting of stockholders.
 
18      §431:4-L  Filing of information required by schedule B.(a)
 
19 No solicitation shall be made by any person, other than the
 
20 management of an insurer unless at least five business days prior
 
21 thereto or a shorter period as the insurance commissioner may
 
22 authorize upon a showing of good cause, there has been filed,
 
23 with the insurance commissioner, by or on behalf of each
 

 
Page 12                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 participant in the solicitation, a statement in duplicate
 
 2 containing the information specified in schedule B and a copy of
 
 3 any material proposed to be distributed to stockholders in
 
 4 furtherance of the solicitation.  Where preliminary copies of any
 
 5 materials are filed, distribution to stockholders should be
 
 6 deferred until the insurance commissioner's comments have been
 
 7 received and complied with.
 
 8      (b)  Within five business days after a solicitation is made
 
 9 by the management of an insurer, or a longer period as the
 
10 insurance commissioner may authorize upon a showing of good
 
11 cause, there shall be filed with the insurance commissioner by or
 
12 on behalf of each participant in the solicitation, other than the
 
13 insurer and by or on behalf of each management nominee or
 
14 director, a statement in duplicate containing the information
 
15 specified by schedule B.
 
16      (c)  If any solicitation on behalf of the management or any
 
17 other person has been made, or if proxy material is ready for
 
18 distribution, prior to a solicitation in opposition thereto, a
 
19 statement in duplicate containing the information specified in
 
20 schedule B shall be filed with the insurance commissioner, by or
 
21 on behalf of each participant in the prior solicitation, other
 
22 than the insurer, as soon as reasonably practicable after the
 
23 commencement of the solicitation in opposition thereto.
 

 
Page 13                                                    2473
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 1      (d)  If, subsequent to the filing of the statements required
 
 2 by subsections (a), (b), and (c), additional persons become
 
 3 participants in a solicitation, there shall be filed with the
 
 4 insurance commissioner, by or on behalf of each person, a
 
 5 statement in duplicate containing the information specified in
 
 6 schedule B, within three business days after the person becomes a
 
 7 participant, or longer period as the insurance commissioner may
 
 8 authorize upon a showing of good cause.
 
 9      (e)  If any material change occurs in the facts reported in
 
10 any statement filed by or on behalf of any participant, an
 
11 appropriate amendment to the statement shall be filed within
 
12 three business days by or on behalf of each respective
 
13 participant with the insurance commissioner.
 
14      (f)  Each statement and amendment thereto filed pursuant to
 
15 this section shall be part of the public files of the insurance
 
16 commissioner.
 
17      §431:4-M  Solicitations prior to furnishing required written
 
18 proxy statement.  Notwithstanding the provisions of section
 
19 431:4-F(a), a solicitation subject to this part may be made prior
 
20 to furnishing stockholders a written proxy statement containing
 
21 the information specified in schedule A with respect to such
 
22 solicitation, provided that:
 

 
 
 
Page 14                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (1)  The statements required by section 431:4-L are filed by
 
 2           or on behalf of each participant in the solicitation;
 
 3      (2)  No form of proxy is furnished to stockholders prior to
 
 4           the time the proxy statement required by section 431:4-
 
 5           F(a) is furnished to such persons.  This paragraph
 
 6           shall not apply where a proxy statement then meeting
 
 7           the requirements of schedule A has been furnished to
 
 8           stockholders;
 
 9      (3)  At least the information specified in paragraphs (2)
 
10           and (3) of the statements required by schedule B to be
 
11           filed by each participant, or an appropriate summary
 
12           thereof, are included in each communication sent or
 
13           given to stockholders in connection with the
 
14           solicitation; and
 
15      (4)  A written proxy statement containing the information
 
16           specified in schedule A with respect to a solicitation
 
17           is sent or given to stockholders at the earliest
 
18           practicable date.
 
19      §431:4-N  Solicitation prior to furnishing required written
 
20 proxy statement; filing requirements.  Two copies of any
 
21 soliciting material proposed to be sent or given to stockholders
 
22 prior to the furnishing of the written proxy statement required
 
23 by section 431:4-F(a) shall be filed with the insurance
 

 
Page 15                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 commissioner in preliminary form at least five business days
 
 2 prior to the date definitive copies of the material are first
 
 3 sent or given to the stockholders, or a shorter period as the
 
 4 insurance commissioner may authorize upon a showing of good cause
 
 5 therefor.
 
 6      §431:4-O  Application of this part to report.
 
 7 Notwithstanding the provisions of section 431:4-F(b) and (c), two
 
 8 copies of any portion of the report referred to in section 431:4-
 
 9 F(b), which comments upon or refers to any solicitation subject
 
10 to this section or to any participant in any solicitation, other
 
11 than the solicitation by the management, shall be filed with the
 
12 insurance commissioner as proxy material subject to this part.
 
13 The portion of the report shall be filed with the insurance
 
14 commissioner in preliminary form at least five business days
 
15 prior to the date copies of the report are first sent or given to
 
16 stockholders.
 
17      §431:4-P  Schedule A: information required in a proxy
 
18 statement.(a)  When applicable, the information to be included
 
19 in a document entitled schedule A shall include, among other
 
20 things:
 
21      (1)  Whether or not the person giving the proxy has the
 
22           power to revoke it;
 

 
 
 
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 1      (2)  A brief outline of the rights of appraisal of
 
 2           dissenting stockholders;
 
 3      (3)  A statement as to who is making the solicitation;
 
 4      (4)  A description of the interest of persons in the matters
 
 5           to be acted upon;
 
 6      (5)  A statement as to the class of voting stock to be voted
 
 7           at the meeting, the number of shares outstanding, and
 
 8           the number of votes to which each class is entitled;
 
 9      (6)  Detailed information of nominees for directors;
 
10      (7)  A statement on remuneration and other transactions with
 
11           management and others;
 
12      (8)  Information on the insurer's bonus, profit sharing, and
 
13           other remuneration plans;
 
14      (9)  Information on the insurer's pension or retirement
 
15           plan;
 
16     (10)  Information on the options, warrants or rights to
 
17           purchase stock of the insurer;
 
18     (11)  Information of the title, amount, and description of
 
19           stock to be authorized or issued;
 
20     (12)  Detailed information on mergers, consolidations,
 
21           acquisitions, and other similar matters; and
 
22     (13)  Detailed information on any asset, capital, or surplus
 
23           of the insurer.
 

 
Page 17                                                    2473
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 1      (b)  If action is to be taken with respect to any matter
 
 2 which is not required to be submitted to a vote of stockholders,
 
 3 this schedule shall state the nature of the matter, the reason
 
 4 for the matter being submitted to a vote of the stockholders, and
 
 5 the action intended to be taken by the management in the event of
 
 6 a negative vote on the matter by the stockholders.
 
 7      (c)  If action is to be taken with respect to any amendment
 
 8 of the insurer's charter, by-laws, or other such documents as to
 
 9 which information is not required, the schedule shall briefly
 
10 state the reasons for and the general effect of the amendment and
 
11 the vote needed for its approval.
 
12      §431:4-Q  Schedule B: information to be included in
 
13 statements filed by or on behalf of a participant other than an
 
14 insurer in a proxy solicitation in an election contest.
 
15 Information to be disclosed in a document entitled schedule B
 
16 shall include, among other things:
 
17      (1)  The name and address of the insurer;
 
18      (2)  Detailed information about the participant;
 
19      (3)  The participant's interest in the stock of the insurer;
 
20      (4)  A description of the time and circumstances in which
 
21           the participant became involved with the solicitation
 
22           and the nature and extant of the activities or proposed
 
23           activities of the participant; and
 

 
Page 18                                                    2473
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 1      (5)  The date and signature of the participant."
 
 2      SECTION 3.  Chapter 431, Hawaii Revised Statutes, is amended
 
 3 by adding to article 10C eight new sections to article 10C to be
 
 4 appropriately designated and to read as follows:
 
 5      "§431:10C-A  Agreement.  The applicant shall execute and
 
 6 file with the commissioner an agreement in a form prescribed by
 
 7 the commissioner, that if certified as a self-insurer the
 
 8 applicant shall:
 
 9      (1)  Permit the commissioner or an authorized representative
 
10           to inspect and copy records and provide them copies of
 
11           records pertaining to the self-insurer's financial
 
12           condition, processing and payment of claims, and any
 
13           other matters pertinent to the administration and
 
14           enforcement of this article; and
 
15      (2)  Provide all benefits required under this article,
 
16           comply with all requirements of articles 10C and 13,
 
17           and rules, and directives of the commissioner,
 
18           including, but not limited to, those relating to
 
19           processing and payment of assessments and fees.
 
20      §431:10C-B  Surety bond, deposit of security, or proof of
 
21 financial ability.  An applicant for self-insurance shall either:
 
22      (1)  File with the commissioner and maintain a bond of a
 
23           surety company authorized to do business in the State,
 

 
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 1           conditioned for the payment of benefits and amounts as
 
 2           would be payable if the applicant were insured under a
 
 3           motor vehicle insurance policy as prescribed in this
 
 4           article.  The bond shall be in the form and penal sum
 
 5           acceptable to the commissioner, but in no event shall
 
 6           be less than $300,000, and shall provide that the bond
 
 7           may not be canceled or otherwise terminated until two
 
 8           years have elapsed from the last day the applicant was
 
 9           self-insured, unless the commissioner has given prior
 
10           written consent.  It shall be undertaken and may be
 
11           enforced in the name of  "Commissioner of Insurance,
 
12           State of Hawaii".  The surety company may not cancel
 
13           the bond for the period of certification; or
 
14      (2)  Deposit with the commissioner:
 
15           (A)  Cash or those securities as may be legally
 
16                purchased for investment by insurance companies
 
17                under this chapter;
 
18           (B)  Evidence satisfactory to the commissioner that
 
19                there are no unsatisfied judgments against the
 
20                applicant.
 
21           As used herein, "cash" includes an irrevocable letter
 
22           of credit issued by a federally insured financial
 
23           institution whose principal office is located in this
 

 
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 1           State.  Prior to the issuance of a certificate of self-
 
 2           insurance, the securities and cash, if appropriate,
 
 3           shall be registered in the name of the "Commissioner of
 
 4           Insurance, State of Hawaii".
 
 5           The deposit shall be held to satisfy claims for
 
 6           personal injury protection benefits and liability
 
 7           coverage as prescribed in this article.  The
 
 8           commissioner shall deposit the cash or securities with
 
 9           the director of finance.  The applicant shall execute
 
10           an agreement satisfactory in form to the commissioner
 
11           with respect to the deposit.  The cash or market value
 
12           of the securities deposited shall be in an amount
 
13           determined by the commissioner to afford security
 
14           substantially equivalent to that afforded under a motor
 
15           vehicle insurance policy, but in no event less than
 
16           $300,000 and shall provide that the cash or securities
 
17           shall not be withdrawn until two years have elapsed
 
18           from the last day the applicant was self-insured,
 
19           unless the commissioner has given prior written
 
20           consent; and
 
21      (3)  Furnish the commissioner satisfactory proof of the
 
22           applicant's solvency and financial ability to timely
 
23           pay benefits and amounts as would be payable if the
 

 
Page 21                                                    2473
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 1           applicant were insured under this article.  The
 
 2           commissioner shall consider the assets, liabilities,
 
 3           profit, loss records, and liquidity of the applicant,
 
 4           the number of vehicles involved, the exposure, and
 
 5           other factors appropriate to determining whether the
 
 6           applicant qualifies as a self-insurer.
 
 7      §431:10C-C  Proof of ability to process and pay claims
 
 8 promptly.  An applicant for self-insurance shall submit proof
 
 9 satisfactory to the commissioner that the applicant has retained
 
10 an adjuster licensed under this chapter to provide a complete
 
11 claims service to process and promptly pay claims in accordance
 
12 with this article and article 13.  During the period that the
 
13 applicant is self-insured, the applicant shall immediately refer
 
14 all claims to the adjuster for processing.
 
15      From time to time, the commissioner may require a self-
 
16 insurer to show that the self-insurer is continuing to maintain
 
17 an effective claims service.
 
18      §431:10C-D  Issuance of certificate of self-insurance.  The
 
19 commissioner shall issue a certificate of self-insurance if:
 
20      (1)  The applicant has provided the bond, cash, or
 
21           securities and proof of qualification as a self-
 
22           insurer affording security substantially equivalent to
 
23           that afforded under a motor vehicle insurance policy;
 
24           and
 

 
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 1      (2)  The commissioner is satisfied that in case of injury or
 
 2           death or property damage, any claimant would have the
 
 3           same rights against the self-insurer as the claimant
 
 4           would have had if a motor vehicle insurance policy was
 
 5           applicable.
 
 6      §431:10C-E  Duty to notify commissioner.  A self-insurer
 
 7 shall notify the commissioner in writing of any change in status
 
 8 of any motor vehicle which is self-insured, such as a transfer,
 
 9 sale, removal from the State, or any additional motor vehicle
 
10 which the self-insurer desires to self insure within ten working
 
11 days after the change is effected.
 
12      §431:10C-F  Duration of certification.  A certificate of
 
13 self-insurance is valid for a period of one year from the date of
 
14 issuance and may be renewed annually.
 
15      §431:10C-G  Revocation of certificate of self-insurance.
 
16 The commissioner may revoke a certificate of self-insurance for
 
17 good cause at any time after providing notice and the opportunity
 
18 for a hearing in accordance with chapter 91.  Failure to comply
 
19 with this article, rules, orders, or directives of the
 
20 commissioner, or to pay any lawful fee or assessment is cause for
 
21 revocation.  Upon such revocation, the owner of any self-insured
 
22 motor vehicle shall not operate or permit operation of the
 
23 vehicle in the State until the owner has obtained insurance or
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 has received a new certificate of self-insurance from the
 
 2 commissioner.
 
 3      §431:10C-H  Termination of self-insurer status and
 
 4 withdrawal of security deposit.  (a)  A person who terminates the
 
 5 person's status as a self-insurer or whose certificate of self-
 
 6 insurance has been revoked and who obtains a motor vehicle
 
 7 insurance policy for any formerly self-insured motor vehicle or
 
 8 shows that the person does not own any motor vehicle, may apply
 
 9 to the commissioner for the return of the person's security
 
10 deposit or cancellation of the surety bond.
 
11      (b)  After a lapse of twenty-four months from termination or
 
12 revocation of self-insurer status and proof satisfactory to the
 
13 commissioner that all claims have been fully adjudicated and
 
14 paid, that all allotments and assessments have been paid, and
 
15 that the owner has complied with the applicable provisions of
 
16 this article, rules, orders, and directives of the commissioner,
 
17 and provisions of the self-insurer's agreement, the commissioner
 
18 may release the securities deposited or permit the cancellation
 
19 of the bond."
 
20      SECTION 4.  Section 431:10C-103, Hawaii Revised Statutes, is
 
21 amended by adding three new definitions to be appropriately
 
22 inserted and to read as follows:
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      ""Alternative care provider" means any person providing
 
 2 medical or rehabilitative services in section 431:10C-302(a)(10)
 
 3 to a claimant covered by a motor vehicle insurance policy.
 
 4      "Anesthetist" means a registered nurse-anesthetist who
 
 5 performs anesthesia services under the supervision of a licensed
 
 6 physician, preferably an anesthesiologist.
 
 7      "Medical fee schedule" refers to the Medicare Resource Based
 
 8 Relative Value Scale System applicable to Hawaii, entitled
 
 9 "Workers' Compensation Supplemental Medical Fee Schedule."
 
10      SECTION 5.  Section 431:11-102, Hawaii Revised Statutes, is
 
11 amended by adding three new definitions to be appropriately
 
12 inserted and to read as follows:
 
13      ""Executive officer" means chief executive officer, chief
 
14 operating officer, chief financial officer, treasurer, secretary,
 
15 controller, or any other individual performing functions
 
16 corresponding to those performed by the foregoing officers under
 
17 whatever title.
 
18      "Statement" means information required to be filed with the
 
19 commissioner pursuant to sections 431:11-104, 431:11-105, and
 
20 431:11-106, and guidelines set forth on a form or in a format
 
21 approved by the commissioner.
 
22      "Ultimate controlling person" means a person who is not
 
23 controlled by any other person."
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 6.  Section 431:10C-105, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§431:10C-105  Self-insurance.  (a)  The motor vehicle
 
 4 insurance required by section 431:10C-104 may be satisfied by any
 
 5 owner of a motor vehicle if:
 
 6      (1)  Such owner provides a surety bond, proof of
 
 7           qualifications as a self-insurer, or other securities
 
 8           affording security substantially equivalent to that
 
 9           afforded under a motor vehicle insurance policy,
 
10           providing coverage at all times for the entire motor
 
11           vehicle registration period, as determined and approved
 
12           by the commissioner under rules; and
 
13      (2)  The commissioner is satisfied that in case of injury,
 
14           death, or property damage, any claimant would have the
 
15           same rights against such owner as the claimant would
 
16           have had if a motor vehicle insurance policy had been
 
17           applicable to such vehicle.
 
18      (b)  A person desiring to qualify as a self-insurer shall
 
19 apply to the commissioner on a form or in a format approved by
 
20 the commissioner pursuant to rules."
 
21      SECTION 7.  Section 431:10C-107, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
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 1      "431:10C-107  Verification of insurance: motor vehicles.
 
 2 (a)  Every insurer shall issue to its insureds a motor vehicle
 
 3 insurance identification card for each motor vehicle for which
 
 4 the basic motor vehicle insurance coverage is written.  The
 
 5 identification card shall contain the following:
 
 6      (1)  Name of make and factory or serial number of the motor
 
 7           vehicle; provided that insurers of five or more motor
 
 8           vehicles which are under common registered ownership
 
 9           and used in the regular course of business shall not be
 
10           required to indicate the name of make and the factory
 
11           or serial number of each motor vehicle;
 
12      (2)  Policy number;
 
13      (3)  Names of the insured and the insurer; and
 
14      (4)  Effective dates of coverage including the expiration
 
15           date.
 
16      (b)  The identification card shall be in the insured motor
 
17 vehicle at all times and shall be exhibited to a law enforcement
 
18 officer upon demand.
 
19      (c)  The identification card shall be resistant to forgery
 
20 by whatever means appropriate.  The commissioner shall approve
 
21 the construction, form, and design of the identification card to
 
22 ensure that the card is forgery resistant.
 

 
 
 
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 1      (d)  The commissioner shall issue a certificate of self-
 
 2 insurance periodically, as necessary, for use in each motor
 
 3 vehicle insured under section 431:10C-105.
 
 4      (e)  The identification card issued by an insurer shall not
 
 5 be issued for a period exceeding the period for which premiums
 
 6 have been paid or earned.  This subsection shall apply only to
 
 7 the first application of a person for a motor vehicle insurance
 
 8 policy and shall not apply to applications for commercial and
 
 9 fleet vehicles."
 
10      SECTION 8.  Section 431:10C-115, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "§431:10C-115  Drivers education fund underwriters fee.
 
13      (a)  The commissioner shall assess and levy upon each
 
14 insurer, and self-insurer, a drivers education fund underwriters
 
15 fee of $2 a year on each motor vehicle insured by each insurer or
 
16 self-insurer.  This fee is due and payable on an annual basis by
 
17 means and at a time to be determined by the commissioner.
 
18      (b)  The commissioner shall deposit the fees into a special
 
19 drivers education fund account.
 
20      (c)  The commissioner shall allocate the fees deposited for
 
21 each fiscal year in the following manner:
 
22      (1)  Fifty per cent to the commissioner to be expended for
 
23           the operation of the drivers education program provided
 
24           in section [[]286-128(d)[]]; and
 

 
Page 28                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (2)  Fifty per cent to the director of commerce and consumer
 
 2           affairs for:
 
 3           (A)  The drivers education program administered by the
 
 4                department of education for high school students;
 
 5                and
 
 6           (B)  The traffic safety education program established
 
 7                and administered by the department of education
 
 8                pursuant to section 302A-417.
 
 9      (d)  Motor vehicles insured under the joint underwriting
 
10 plan shall be excluded from the drivers' education fund
 
11 assessment.
 
12      [(d)] (e)  The commissioner shall adopt rules in accordance
 
13 with chapter 91 for the execution of this section and the
 
14 distribution of this fund."
 
15      SECTION 9.  Section 431:11-103, Hawaii Revised Statutes, is
 
16 amended by amending subsection (b) to read as follows:
 
17      "(b)  In addition to investments in common stock, preferred
 
18 stock, debt obligations, and other securities permitted [under
 
19 article 6,] in this chapter, a domestic insurer may also:
 
20      (1)  Invest in common stock, preferred stock, debt
 
21           obligations, and other securities of one or more
 
22           subsidiaries, amounts which do not exceed the lesser of
 
23           ten per cent of the insurer's assets or fifty per cent
 

 
Page 29                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           of the insurer's surplus as regards policyholders;
 
 2           provided that after the investments, the insurer's
 
 3           surplus as regards policyholders will be reasonable in
 
 4           relation to the insurer's outstanding liabilities and
 
 5           adequate to its financial needs.  In calculating the
 
 6           amount of the investments, investments in domestic or
 
 7           foreign insurance subsidiaries shall be excluded, and
 
 8           there shall be included:
 
 9           (A)  Total net moneys or other consideration expended
 
10                and obligations assumed in the acquisition or
 
11                formation of a subsidiary, including all
 
12                organizational expenses and contributions to
 
13                capital and surplus of the subsidiary whether or
 
14                not represented by the purchase of capital stock
 
15                or issuance of other securities, and
 
16           (B)  All amounts expended in acquiring additional
 
17                common stock, preferred stock, debt obligations,
 
18                and other securities and all contributions to the
 
19                capital or surplus of a subsidiary subsequent to
 
20                its acquisition or formation;
 
21      (2)  Invest any amount in common stock, preferred stock,
 
22           debt obligations, and other securities of one or more
 
23           subsidiaries engaged or organized to engage exclusively
 

 
Page 30                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           in the ownership and management of assets authorized as
 
 2           investments for the insurer; provided that each
 
 3           subsidiary agrees to limit its investments in any asset
 
 4           so that the investments will not cause the amount of
 
 5           the total investment of the insurer to exceed any of
 
 6           the investment limitations specified in [item]
 
 7           paragraph (1) or in [article 6.] this chapter.  For the
 
 8           purpose of this subsection, the total investment of the
 
 9           insurer shall include:
 
10           (A)  Any direct investment by the insurer in an asset,
 
11                and
 
12           (B)  The insurer's proportionate share of any
 
13                investment in an asset by any subsidiary of the
 
14                insurer, which shall be calculated by multiplying
 
15                the amount of the subsidiary's investment by the
 
16                percentage of the ownership of the subsidiary; and
 
17      (3)  With the approval of the commissioner, invest any
 
18           greater amount in common stock, preferred stock, debt
 
19           obligations, or other securities of one or more
 
20           subsidiaries; provided that after the investment the
 
21           insurer's surplus as regards policyholders will be
 
22           reasonable in relation to the insurer's outstanding
 
23           liabilities and adequate to its financial needs."
 

 
Page 31                                                    2473
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 1      SECTION 10.  Section 431:11-106, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§431:11-106  Standards and management of an insurer within
 
 4 a holding company system.
 
 5      (a)  (1)  Transactions within a holding company system to
 
 6                which an insurer subject to registration is a
 
 7                party shall be subject to the following standards:
 
 8           (A)  The terms shall be fair and reasonable;
 
 9           (B)  Charges or fees for services performed shall be
 
10                reasonable;
 
11           (C)  Expenses incurred and payment received shall be
 
12                allocated to the insurer in conformity with
 
13                customary insurance accounting practices
 
14                consistently applied;
 
15           (D)  The books, accounts, and records of each party to
 
16                all transactions shall be so maintained as to
 
17                clearly and accurately disclose the nature and
 
18                details of the transactions including the
 
19                accounting information as is necessary to support
 
20                the reasonableness of the charges or fees to the
 
21                respective parties; and
 
22           (E)  The insurer's surplus as regards policyholders
 
23                following any dividends or distributions to
 

 
Page 32                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                shareholder affiliates shall be reasonable in
 
 2                relation to the insurer's outstanding liabilities
 
 3                and adequate to its financial needs.
 
 4      (2)  The following transactions involving a domestic insurer
 
 5           and any person in its holding company system may not be
 
 6           entered into unless the insurer has notified the
 
 7           commissioner in writing of its intention to enter into
 
 8           the transaction at least thirty days prior thereto, or
 
 9           a shorter period as the commissioner may permit, and
 
10           the commissioner has not disapproved it within that
 
11           period:
 
12           (A)  Sales, purchases, exchanges, loans, or extensions
 
13                of credit, guarantees, or investments; provided
 
14                that the transactions are equal to or exceed:
 
15                (i)  With respect to nonlife insurers, the lesser
 
16                     of three per cent of the insurer's admitted
 
17                     assets or twenty-five per cent of surplus as
 
18                     regards policyholders each as of the thirty-
 
19                     first day of December next preceding; or
 
20               (ii)  With respect to life insurers, three per cent
 
21                     of the insurer's admitted assets as of the
 
22                     thirty-first day of December next preceding;
 

 
 
 
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 1           (B)  Loans or extensions of credit to any person who is
 
 2                not an affiliate, where the insurer makes the
 
 3                loans or extensions of credit with the agreement
 
 4                or understanding that the proceeds of the
 
 5                transactions, in whole or in substantial part, are
 
 6                to be used to make loans or extensions of credit
 
 7                to, to purchase assets of, or to make investments
 
 8                in, any affiliate of the insurer making the loans
 
 9                or extensions of credit provided the transactions
 
10                are equal to or exceed:
 
11                (i)  With respect to nonlife insurers, the lesser
 
12                     of three per cent of the insurer's admitted
 
13                     assets or twenty-five per cent of surplus as
 
14                     regards policyholders each as of the thirty-
 
15                     first day of December next preceding; or
 
16               (ii)  With respect to life insurers, three per cent
 
17                     of the insurer's admitted assets as of the
 
18                     thirty-first day of December next preceding;
 
19           (C)  Reinsurance agreements or modifications thereto in
 
20                which the reinsurance premium or a change in the
 
21                insurer's liabilities equals or exceeds five per
 
22                cent of the insurer's surplus as regards
 
23                policyholders, as of the 31st day of December next
 

 
Page 34                                                    2473
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 1                preceding, including those agreements which may
 
 2                require as consideration the transfer of assets
 
 3                from an insurer to a nonaffiliate, if an agreement
 
 4                or understanding exists between the insurer and
 
 5                nonaffiliate that any portion of the assets will
 
 6                be transferred to one or more affiliates of the
 
 7                insurer;
 
 8           (D)  All management agreements, service contracts, and
 
 9                all cost-sharing arrangements; and
 
10           (E)  Any material transactions, specified by
 
11                regulation, which the commissioner determines may
 
12                adversely affect the interests of the insurer's
 
13                policyholders.
 
14 Nothing in this section shall be deemed to authorize or permit
 
15 any transactions which, in the case of an insurer not a member of
 
16 the same holding company system, would be otherwise contrary to
 
17 law.
 
18      (3)  A domestic insurer may not enter into transactions,
 
19           which are part of a plan or series of like transactions
 
20           with persons within the holding company system, if the
 
21           purpose of those separate transactions is to avoid the
 
22           statutory threshold amount and thus avoid the review
 
23           that would otherwise occur.  If the commissioner
 

 
Page 35                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           determines that the separate transactions were entered
 
 2           into over any twelve month period for that purpose, the
 
 3           commissioner may exercise the commissioner's authority
 
 4           under section 431:11-111[.];
 
 5      (4)  The commissioner, in reviewing transactions pursuant to
 
 6           subsection (a)(2), shall consider whether the
 
 7           transactions comply with the standards set forth in
 
 8           subsection (a)(1) and whether they may adversely affect
 
 9           the interests of policyholders[.];
 
10      (5)  The commissioner shall be notified within thirty days
 
11           of any investment of the domestic insurer in any one
 
12           corporation if the total investment in the corporation
 
13           by the insurance holding company system exceeds ten per
 
14           cent of the corporation's voting securities.
 
15      (b)  (1) No domestic insurer shall pay any extraordinary
 
16           dividend or make any other extraordinary distribution
 
17           to its shareholders until:
 
18           (A)  Thirty days after the commissioner has received
 
19                notice of the declaration thereof and has not
 
20                within the period disapproved the payment; or
 
21           (B)  The commissioner shall have approved the payment
 
22                within the thirty-day period[.];
 
23           and
 

 
Page 36                                                    2473
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 1      (2)  For purposes of this section, an extraordinary dividend
 
 2           or distribution includes any dividend or distribution
 
 3           of cash or other property, whose fair market value
 
 4           together with that of other dividends or distributions
 
 5           made within the preceding twelve months exceeds the
 
 6           [[]lesser[]] of:
 
 7           (A)  Ten per cent of such insurer's surplus as regards
 
 8                policyholders as of the thirty-first day of
 
 9                December next preceding; or
 
10           (B)  The net gain from operations of a life insurer, or
 
11                the net income, if the insurer is not a life
 
12                insurer, not including realized capital gains, for
 
13                the twelve-month period ending the thirty-first
 
14                day of December next preceding.
 
15           Extraordinary dividend or distribution shall not
 
16           include pro rata distributions of any class of the
 
17           insurer's own securities.
 
18                In determining whether a dividend or distribution
 
19           is extraordinary, an insurer other than a life insurer
 
20           may carry forward income from the previous two calendar
 
21           years that has not already been paid out as dividends.
 
22           This carry-forward shall be computed by taking the net
 
23           income from the second and third preceding calendar
 

 
Page 37                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           years, not including realized capital gains, less
 
 2           dividends paid in the second and immediate preceding
 
 3           calendar years.
 
 4                Notwithstanding any other provisions of law, an
 
 5           insurer may declare an extraordinary dividend or
 
 6           distribution that is conditional upon the
 
 7           commissioner's approval thereof, and the declaration
 
 8           shall confer no rights upon shareholders until the
 
 9           commissioner has either approved the payment of the
 
10           dividend or distribution or has not disapproved the
 
11           payment within the thirty-day period referred to above.
 
12      (c)  (1) Notwithstanding the control of a domestic insurer
 
13           by any person, the officers and directors of the
 
14           insurer shall not thereby be relieved of any obligation
 
15           or liability which they would otherwise be subject to
 
16           by law.  The insurer shall be managed so as to assure
 
17           its separate operating identity consistent with this
 
18           article[.]; and
 
19      (2)  Nothing herein shall preclude a domestic insurer from
 
20           having or sharing a common management or cooperative or
 
21           joint use of personnel, property, or services with one
 
22           or more other persons under arrangements meeting the
 
23           standards of subsection (a)(1).
 

 
Page 38                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (d)  For purposes of this article, in determining whether an
 
 2 insurer's surplus as regards policyholders is reasonable in
 
 3 relation to the insurer's outstanding liabilities and adequate to
 
 4 its financial needs, the following factors, among others, shall
 
 5 be considered:
 
 6      (1)  The size of the insurer as measured by its assets,
 
 7           capital and surplus, reserves, premium writings,
 
 8           insurance in force, and other appropriate criteria;
 
 9      (2)  The extent to which the insurer's business is
 
10           diversified among the several lines of insurance;
 
11      (3)  The number and size of risks insured in each line of
 
12           business;
 
13      (4)  The extent of the geographical dispersion of the
 
14           insurer's insured risks;
 
15      (5)  The nature and extent of the insurer's reinsurance
 
16           program;
 
17      (6)  The quality, diversification, and liquidity of the
 
18           insurer's investment portfolio;
 
19      (7)  The recent past and projected future trend in the size
 
20           of the insurer's investment portfolio;
 
21      (8)  The surplus as regards policyholders maintained by
 
22           other comparable insurers;
 
23      (9)  The adequacy of the insurer's reserves; and
 

 
Page 39                                                    2473
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 1     (10)  The quality and liquidity of investments in affiliates.
 
 2           The commissioner may treat any investment as a
 
 3           disallowed asset for purposes of determining the
 
 4           adequacy of surplus as regards policyholders whenever
 
 5           in the commissioner's judgment the investment so
 
 6           warrants.
 
 7      (e)  The factors set forth in subsection (d) are not
 
 8 intended to be an exhaustive list.  In determining the adequacy
 
 9 and reasonableness of an insurer's surplus, no single factor is
 
10 necessarily controlling.
 
11      (1)  The commissioner shall consider the net effect of all
 
12           of the factors, along with other factors bearing on the
 
13           financial condition of the insurer;
 
14      (2)  In comparing the surplus maintained by other insurers,
 
15           the commissioner shall consider the extent to which
 
16           each of these factors varies among insurers; and
 
17      (3)  In determining the quality and liquidity of investments
 
18           in subsidiaries, the commissioner shall consider the
 
19           individual subsidiary and may discount or disallow its
 
20           valuation to the extent warranted by individual
 
21           investments."
 
22      SECTION 11.  Section 431:12-105, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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 1      "§431:12-105  Mass merchandising requirements.  Mass
 
 2 merchandising of insurance and every mass merchandising plan
 
 3 shall be subject to the following conditions:
 
 4      (1)  The insurance offered shall be open to participation by
 
 5           or be available to every employee of the employer who
 
 6           meets the underwriting requirements of the insurer[.];
 
 7      (2)  The insurance shall be offered without discrimination
 
 8           against any employee as to rates, forms, or coverages.
 
 9           Nothing herein shall preclude the establishment of
 
10           different classes of risks[.];
 
11      (3)  Upon the termination of employment or upon the
 
12           termination of the mass merchandising agreement, an
 
13           insured employee shall have the option of continuing
 
14           the employee's participation in a group policy or the
 
15           employee's individual policy then in force for a period
 
16           of one year upon payment of the applicable premium;
 
17           provided that the employee shall exercise the
 
18           employee's option within thirty days following the date
 
19           of such termination.  The terms, conditions, and
 
20           coverages for the one-year period are those that were
 
21           effective on the date of termination and shall not be
 
22           more restrictive than those contained in the mass
 
23           merchandising agreement, the group policy, or the
 

 
Page 41                                                    2473
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           individual policy in force immediately prior to the
 
 2           date of termination;
 
 3      (4)  The insurer shall issue a certificate or other evidence
 
 4           of participation to every member covered under a group
 
 5           policy and a policy of insurance to every member
 
 6           insured under an individual policy[.]; and
 
 7      (5)  The insurance offered shall not be contingent upon the
 
 8           purchase of any other insurance, product, or service;
 
 9           nor shall the purchase of any other insurance, product,
 
10           or service be contingent upon the purchase of the motor
 
11           vehicle, property, and casualty insurance offered."
 
12      SECTION 12.  Section 431:12-115, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "§431:12-115  Establishment and maintenance of office.  (a)
 
15 Every insurer selling insurance on a mass merchandising basis
 
16 shall establish and maintain at all times an office in the State
 
17 to conduct the administration of its business and handle claims.
 
18      (b)  Establishment and maintenance of an office by any
 
19 licensed general agent of an insurer shall meet the requirements
 
20 of this section."
 
21      SECTION 13.  In codifying the new sections added to chapter
 
22 431, Hawaii Revised Statutes, by sections 2, 3, and 4 of this
 
23 Act, the revisor of statutes shall substitute appropriate section
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 numbers for the letters used in the designations of these new
 
 2 sections in this Act.
 
 3      SECTION 14.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5      SECTION 15.  This Act shall take effect upon its approval.