STAND. COM. REP. NO. 1202

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1623
                                        H.D. 1
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred H.B. No. 1623, 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 expand the definition of
"captive insurance company" to include five classes of captive
insurance companies with specific capital or surplus requirements
and to exempt newly authorized categories of captive insurance
companies from the National Association of Insurance
Commissioners risk-based capital reports filing requirements.

     The Hawaii Captive Insurance Council and J & H Marsh
McLennan presented testimony in support of the measure.  Although
not present at the hearing, Bank of Hawaii and 50th State Risk
Management Services, Inc. submitted written testimony in support
of the measure.

     The State Insurance Commissioner and the Hawaii Insurance
Council presented testimony in support of the intent of the
measure with proposed amendments.

     Your Committee finds that the captive insurance industry has
grown significantly in the past five years.  Hawaii is now the
second largest home for captive insurance companies in the United
States and is the premier captive insurance domicile in the
Pacific Basin.  Today, sixty-five captive insurance companies are

 
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licensed in Hawaii, contributing to the economic diversification
and tax base of the State.

     Your Committee finds that establishing different classes of
captive insurance companies and licensing criteria will give
Hawaii a competitive edge over other leading captive insurance
domiciles.

     Your Committee has serious unresolved concerns regarding the
Class 5 captive insurance company category, which covers risks of
unrelated companies.  Captive insurance companies are exempt from
many of the laws that regulate the insurance industry.  The
reasons for this limited regulation is that captive insurance
companies cover only related risks through a self-insurance
mechanism, and are establishd by owners who are themselves the
insured.  Therefore, insolvency of a captive insurance company
will affect the owner/insured without directly causing injury to
the public.  This basis for limited regulation of captive
insurance companies does not apply to Class 5 captive insurance
companies as proposed by this measure.

     Accordingly, your Committee has amended this measure to:

     (1)  Delete all references to Class 5 captive insurance
          companies; and

     (2)  Specify that the capital and surplus requirements for
          Class 3 captive insurance companies be $500,000 for
          risk retention captive insurance companies, and
          $750,000 for association captive insurance companies. 

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 1623, H.D. 1, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as H.B. No. 1623, H.D. 1, S.D. 1, and be placed on the
calendar for Third Reading.


 
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                                   STAND. COM. REP. NO. 1202
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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