REPORT TITLE:
Captive Insurance


DESCRIPTION:
Reorganizes provisions relating to the confidentiality of
nonpublic information of captive insurers.  Clarifies financial
statement requirements.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2562
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.  Chapter 431, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to article 19 to be appropriately
 
 3 designated and to read as follows:
 
 4      "§431:19-    Confidential treatment.  (a)  All nonpublic
 
 5 financial information of a captive insurance company, its parent
 
 6 company or member organizations, or a risk retention captive
 
 7 insurance company, disclosed to the commissioner pursuant to this
 
 8 article, shall be given confidential treatment and shall not be
 
 9 made public by the commissioner without the prior written consent
 
10 of the captive insurance company, parent company, member
 
11 organization, or risk retention captive insurance company to
 
12 which the information pertains.
 
13      (b)  The commissioner may disclose nonpublic financial
 
14 information of a captive insurance company, its parent company or
 
15 member organizations, or a risk retention captive insurance
 
16 company to insurance departments of other states without the
 
17 prior consent of the captive insurance company, parent company,
 
18 member organization, or risk retention captive insurance company
 
19 to which the information pertains.
 

 
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 1      (c)  If the commissioner determines that the interest of the
 
 2 captive insurance company's policyholders or shareholders, or the
 
 3 public will be served by making the nonpublic financial
 
 4 information public, the commissioner may make all or any part of
 
 5 the information public in such manner as the commissioner deems
 
 6 appropriate, after the commissioner has given the affected
 
 7 captive insurance company, parent company, member organization,
 
 8 or risk retention captive insurance company three days notice of
 
 9 the commissioner's intent to make the disclosure.
 
10      (d)  For purposes of this section, "nonpublic financial
 
11 information" means information regarding a person's financial
 
12 condition that, prior to disclosure to the commissioner pursuant
 
13 to this article, is not a public record as defined in rule
 
14 1001(5) of section 626-1.
 
15      (e)  In the case of a person whose equity securities are
 
16 collectively owned and held by thirty-six or more persons,
 
17 "nonpublic financial information" does not mean financial
 
18 information disclosed to owners and holders of equity securities.
 
19 As used in this subsection, "equity securities" means:
 
20      (1)  A share in a corporation, whether or not transferable
 
21           or denominated a "stock", or similar security
 
22           evidencing the ownership interest of a person;
 
23      (2)  The interest of a limited partner in a limited
 

 
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 1           partnership;
 
 2      (3)  The interest of a partner in a partnership, including a
 
 3           joint venture; or
 
 4      (4)  A warrant or right, other than a right to convert,
 
 5           purchase, sell, or subscribe to a share, security, or
 
 6           interest of a kind specified in paragraph (1), (2), or
 
 7           (3)."
 
 8      SECTION 2.  Section 431:19-107, Hawaii Revised Statutes, is
 
 9 amended by amending subsections (a) and (b) to read as follows:
 
10      "(a)  Each [pure] class one, class two, and class four
 
11 captive insurance company shall submit to the commissioner a
 
12 statement of financial condition written according to generally
 
13 accepted accounting principles, or other comprehensive basis of
 
14 accounting deemed appropriate by the commissioner, and audited by
 
15 an independent certified public accountant on or before the last
 
16 day of the sixth month following the end of the company's fiscal
 
17 year.
 
18      (b)  Each [captive insurance company that is not a pure]
 
19 class three captive insurance company shall annually file with
 
20 the commissioner the following:
 
21      (1)  Annual statement and audit:
 
22           (A)  On or before March 1, or such day subsequent
 
23                thereto as the commissioner upon request and for
 

 
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 1                cause may specify, an annual statement using the
 
 2                National Association of Insurance Commissioners'
 
 3                annual statement blank plus any additional
 
 4                information required by the commissioner, which
 
 5                shall be a true statement of its financial
 
 6                condition, transactions, and affairs as of the
 
 7                immediately preceding December 31.  The reported
 
 8                information shall be verified by oaths of at least
 
 9                two of the captive's principal officers;
 
10           (B)  On or before June 1, or such day subsequent
 
11                thereto as the commissioner upon request and for
 
12                cause may specify, an audit by a designated
 
13                independent certified public accountant or
 
14                accounting firm of the financial statements
 
15                reporting the financial condition and results of
 
16                the operation of the captive;
 
17           (C)  The annual statement and audit shall be prepared
 
18                in accordance with the National Association of
 
19                Insurance Commissioners' annual statement
 
20                instructions, following the practice and
 
21                procedures prescribed by the National Association
 
22                of Insurance Commissioners' practices and
 
23                procedures manuals.  Each risk retention group
 

 
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 1                shall also comply with section 431:3-302; and
 
 2      (2)  On or before each March 1, or such day subsequent
 
 3           thereto as the commissioner upon request and for cause
 
 4           may specify, a risk-based capital report in accordance
 
 5           with section 431:3-402; provided that class 3
 
 6           association captive insurance companies and class 4
 
 7           captive insurance companies shall not be required to
 
 8           file their risk-based capital reports with the National
 
 9           Association of Insurance Commissioners."
 
10      SECTION 3.  Section HRS 431:19-102.5, Hawaii Revised
 
11 Statutes, is repealed.
 
12      ["[§431:19-102.5]  Confidential treatment.  All nonpublic
 
13 financial information of a captive insurance company and of its
 
14 parent or its member organizations, or a risk retention captive
 
15 insurance company, disclosed to the commissioner pursuant to
 
16 section 431:19-102 shall be given confidential treatment and
 
17 shall not be made public by the commissioner, except to insurance
 
18 departments of other states, without the prior written consent of
 
19 the captive insurer or parent company or member organization or
 
20 risk retention captive insurer to which it pertains.  In the
 
21 event the commissioner determines that the interest of the
 
22 policyholders, shareholders, or the public will be served by
 
23 making the information public, then after giving the captive
 

 
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 1 insurance company and its parent or member organizations or risk
 
 2 retention captive insurer which would be affected thereby three
 
 3 days notice of intent, the commissioner may make public all or
 
 4 any part thereof in such manner as the commissioner deems
 
 5 appropriate.
 
 6      For purposes of this section, "nonpublic financial
 
 7 information" means information regarding a person's financial
 
 8 condition that prior to disclosure to the commissioner pursuant
 
 9 to section 431:19-102 is not a public record as defined in rule
 
10 1001(5) of section 626-1.  In the case of a person whose equity
 
11 securities are collectively owned and held by thirty-six or more
 
12 persons, "nonpublic financial information" does not include
 
13 financial information disclosed to owners and holders of equity
 
14 securities.  As used herein, equity securities means:
 
15      (1)  A share in a corporation, whether or not transferable
 
16           or denominated a "stock", or similar security
 
17           evidencing an ownership interest in the person;
 
18      (2)  Interest of a limited partner in a limited partnership;
 
19      (3)  Interest of a partner in a partnership, including a
 
20           joint venture; or
 
21      (4)  A warrant or right, other than a right to convert, to
 
22           purchase, sell, or subscribe to a share, security, or
 
23           interest of a kind specified in [paragraph] (1), (2),
 

 
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 1           or (3)."] 
 
 2      SECTION 4.  Statutory material to be repealed is bracketed.
 
 3 New statutory material is underscored.
 
 4      SECTION 5.  This Act shall take effect upon its approval.
 
 5 
 
 6                       INTRODUCED BY:  ___________________________