Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 1058 entitled:

begs leave to report as follows:

The purpose of this measure is to allow a captive insurance company to invest in agency paper, in mutual funds comprised solely of public obligations or agency paper, or in investments that are a combination of both.

The Hawaii Captive Insurance Council, GWPA Actuaries Consultants, and Bank of Hawaii testified in support of this measure. The Insurance Commissioner (Commissioner) supported the general intent, but opposed the substance of the measure.

This measure authorizes captive insurance companies to invest in instruments issued by agencies or instrumentalities established or chartered by the United States Congress, commonly referred to as "agency paper", in mutual funds comprised solely of public obligations or agency paper, or in investments that are a combination thereof. This measure would provide captive insurance companies with a broader range of safe investment instruments and allow Hawaii to compete with other captive insurance domiciles that already permit these type of investments.

Your Committee finds that this measure would effectively circumvent the Commissioner's authority to determine the appropriate investment requirements for each captive licensee. Therefore, your Committee has amended this measure by replacing the proposed new language with language authorizing the Commissioner to approve, as the Commissioner deems appropriate, a captive licensee's investments beyond those specifically allowed under article 6 of the Insurance Code.

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. 1058, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1058, S.D. 1, and be placed on the calendar for Third Reading.