STAND. COM. REP. NO. 2884

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 2986
                                        H.D. 2
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred H.B. No. 2986, H.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO THE STATE RISK MANAGEMENT AND
     INSURANCE ADMINISTRATION,"

begs leave to report as follows:

     The purpose of this measure is to allow the State
Comptroller (Comptroller) to establish a captive insurance
company to insure the general liabilities of the State.

     The Department of Accounting and General Services and the
Insurance Commissioner (Commissioner) submitted testimony on the
measure.

     Currently, the State pays out of the State Risk Management
Revolving Fund almost $5,000,000 in premiums per year to insure
its property and casualty liability risks.  Additionally,
approximately $10,000,000 in a revolving fund is used to cover
policy deductibles of between $50,000 and $3,000,000 per
occurrence of loss, and each year millions of dollars in General
Fund appropriations are required to replenish this revolving
fund.

     By establishing a captive insurance company to insure its
risks, the State would realize a savings in its insurance costs
and retain control over insurance reserves.  The establishment of
a state-owned captive insurance company would also provide a

 
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                                   STAND. COM. REP. NO. 2884
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mechanism for insuring other risks of the State in the future,
including those related to the operations of the State's airports
and medical facilities, and allow for the centralized management
of the State's self-insured risks, including in the area of
workers' compensation.

     Your Committee finds that a study of the feasibility and
cost effectiveness of establishing a state-owned captive
insurance facility is advisable since the costs of a state-owned
facility related to maintaining insurance reserves should be less
than current costs, and the State could choose to exempt a state
facility from the payment of insurance premium taxes, thereby
further lowering the facility's operating expenses.  Therefore,
your Committee has amended this measure to appropriate $100,000
for a feasibility study to be conducted by the Commissioner and
to make this measure effective on July 1, 2000.

     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. 2986, H.D. 2, as amended herein, and
recommends that it pass Second Reading in the form attached
hereto as H.B. No. 2986, H.D. 2, S.D. 1, and be referred to the
Committee on Ways and Means.

                                   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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