Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 1067 entitled:

begs leave to report as follows:

The purpose of this measure is to require the insurance commissioner to use an actuarial analysis of a hurricane property insurer's financial ability to pay potential claims.

Your Committee received testimony in support of this measure from the Insurance Division, Hawaii Association of Realtors, and Hurricane Hazard Mitigation Ad Hoc Work Group. Testimony in opposition was received from Zephyr Insurance Company, Inc.

Currently, the insurance commissioner has no legal authority to determine on a continuing basis whether an insurer is over exposed to catastrophic risk. A certificate of authority to do business cannot be withheld if the insurer meets the capitalization requirements. Although insurers are subject to triennial examinations and quarterly reports to monitor cash flow problems and finances, which works well under normal conditions, an insurer's financial picture could change unpredictably and drastically if a hurricane strikes.

Your Committee finds that the use of an actuarial analysis of a hurricane property insurer's financial ability to pay potential claims in a case of a catastrophic event would assist the Insurance Division in reducing the possibility of an insurance unavailability problem reoccurring, as was the case with Hurricane Iniki. The analysis would determine if the insurer has adequately spread its risk and if it has an inordinate amount of hurricane risks in its total portfolio.

Your Committee has amended this measure by changing the effective date to July 1, 2050, in the interests of continuing discussions on this measure in light of testimony on the issue on the extent of the powers of the insurance commissioner.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1067, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1067, S.D. 1, and be placed on the calendar for Third Reading.