STAND. COM. REP. NO. 670

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 665
                                     H.D. 2
                                     



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 H.B. No. 665, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:

     The purpose of this bill is to provide for the phase-out and
repeal of the Hawaii Hurricane Relief Fund (HHRF) on June 30,
2001, by:

     (1)  Creating two funds to receive the moneys transferred
          from the HHRF:

          (a)  The Natural Disaster Loss Mitigation Fund to
               mitigate losses incurred from natural disasters in
               the State; and

          (b)  The Hurricane Relief Loan Fund;

     (2)  Mitigating the long-term risk posed by hurricanes
          through a loan program to be administered by the
          Hurricane Relief Administrative Procedures Loan
          Committee; and

     (3)  Establishing the Hurricane Loss Projection Methodology
          Commission to assist the Hurricane Relief
          Administrative Procedures Loan Committee in the loan
          process.


 
 
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     Hurricane Protection Systems, Inc., and an individual
supported this measure with proposed revisions.  The Building
Industry Association of Hawaii and the Hawaii Association of
Realtors supported the intent of this measure.

     The HHRF, the Hawaii Insurers Council, the Hawaii
Independent Insurance Agents Association, Island Insurance
Companies, and the National Association of Independent Insurers
opposed this measure.

     The Department of Commerce and Consumer Affairs and
Department of Budget and Finance submitted comments.  State Farm
Insurance Companies also submitted comments, suggesting HHRF
moneys be returned to prior policyholders instead of the general
fund.

     Concerns were raised about the phase-out and termination of
the HHRF and the establishment of the Hurricane Loss Projection
Methodology Commission and Natural Disaster Loss Mitigation Fund.
Your Committee finds that the HHRF was meant to be a temporary
solution to the unavailability of hurricane insurance.  Since
HHRF's establishment, the hurricane insurance market has improved
markedly.  Your Committee finds, however, that terminating the
HHRF as of July 1, 2001, may be premature and may disrupt the
insurance marketplace.

     Upon further consideration, your Committee has amended this
bill by deleting its substance, and instead, inserting the
following:

     (1)  Including a findings and purpose narrative;

     (2)  Directing HHRF to stop writing hurricane insurance by
          December 1, 2004.  HHRF policies in force as of that
          date will be allowed to run off for their one-year
          terms until December 1, 2005, after which the HHRF will
          provide no hurricane coverage.  HHRF will be allowed to
          continue generating revenues to pay claims if there is
          a hurricane before the proposed repeal date;

     (3)  Creating the Emergency Natural Disaster Relief Fund on
          December 15, 2005, to be administered by the Governor
          and to be used following a natural disaster for
          disaster relief efforts.  If there has been no
          hurricane before December 1, 2005, and the HHRF stops
          operations, 99 percent of the net moneys of the HHRF
          will be transferred to this fund;


 
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     (4)  Creating a Natural Disaster Loss Mitigation Fund on
          December 15, 2005, to be administered by the Department
          of Commerce and Consumer Affairs and to be used for
          natural disaster loss mitigation efforts.  This fund
          will provide a long-term solution to hurricane risk.
          If there has been no hurricane before December 1, 2005,
          and the HHRF stops operations, one percent of the net
          moneys of the HHRF will be transferred to this fund.
          Beginning in 2006, one percent of the moneys available
          in the Emergency Natural Disaster Relief Fund will be
          transferred to this fund;

     (5)  Providing that if a hurricane has occurred before
          December 1, 2005, the HHRF will continue to operate
          until all of its claims and other obligations are paid.
          In addition, transfer of moneys from the HHRF to the
          Emergency Natural Disaster Relief Fund and Natural
          Disaster Loss Mitigation Fund will be deferred until
          after all of HHRF's claims and other obligations are
          paid;

     (6)  Changing the Hurricane Relief Administrative Procedures
          Loan Committee (Loan Committee) to be an advisory
          committee of the HHRF Board of Directors (HHRF Board).
          With regard to the Loan Committee, provides that:

          (a)  The HHRF Board may transfer up to an unspecified
               amount annually from the HHRF to the Loan
               Committee;

          (b)  Members of the Loan Committee, other than ex
               officio members, will be appointed by the HHRF
               Board;

          (c)  The Loan Committee may request the HHRF Board to
               employ or contract with technical experts and
               others on their behalf;

          (d)  Sets forth in greater clarity the duties of the
               Loan Committee and procedures for applying for a
               loan or grant; and

          (e)  The Loan Committee will be granted immunity from
               liability;

     (7)  Changing the Hurricane Loss Projection Methodology
          Commission (Methodology Commission) to be an advisory
          committee of the HHRF Board.  With regard to the
          Methodology Commission, this amended bill provides
          that:

 
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          (a)  Instead of allowing the Methodology Commission to
               hire and contract with technical experts and
               others, allows the Methodology Commission to
               request the HHRF Board to employ or contract with
               technical experts and others on their behalf;

          (b)  Makes the HHRF the source of funding for the
               Methodology Commission;

          (c)  Members will be appointed by the HHRF Board; and

          (d)  Clarifying duties of the Methodology Commission
               and its interaction with the Loan Committee.

     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 H.B. No. 665, H.D. 1, as amended herein, and
recommends that it be referred to the Committee on Finance in the
form attached hereto as H.B. No. 665, H.D. 2.

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



                                   ______________________________
                                   RON MENOR, Chair