REPORT TITLE:
Insurance


DESCRIPTION:
Creates a reinsurance enterprise zone within the State through
tax and regulatory incentives.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           1448
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO ECONOMIC DEVELOPMENT.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Purpose.  The legislature finds that Hawaii,
 
 2 although uniquely situated as a geographical and economic
 
 3 crossroads of the Pacific, has not taken full advantage of the
 
 4 array of opportunities available to it for the development of the
 
 5 State as a business center of the Pacific.  The legislature
 
 6 further finds that many of Hawaii's educated youth leave the
 
 7 State for professional jobs on the mainland.
 
 8      Additionally, the State has found it necessary to spend as
 
 9 much as $60,000,000 as of the 1998-1999 fiscal year, to obtain
 
10 reinsurance for the Hawaii hurricane relief fund.  With no source
 
11 of reinsurance available within the State, this effectively
 
12 constitutes $60,000,000 lost to the State's economy each year.
 
13 This amount would be substantial in any state, and is
 
14 particularly significant to a small state such as Hawaii, costing
 
15 nearly $60 a year for virtually every state resident.
 
16      The legislature declares that the health, safety, and
 
17 welfare of the people of this State are dependent upon the
 
18 continual encouragement, development, growth, and expansion of
 
19 the private sector, and that there are certain areas of economic
 

 
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 1 development which would benefit the State in this regard.  It is
 
 2 the purpose of this Act to create a reinsurance enterprise zone
 
 3 within the State which would attract the formation and
 
 4 maintenance of qualified reinsurers in the State by means of tax
 
 5 and regulatory incentives.  Any state fees collected from
 
 6 reinsurers taking advantage of the provisions of this Act (less
 
 7 funds sufficient to operate the program) would be utilized by the
 
 8 State.
 
 9      In order to attract qualified reinsurers to organize or
 
10 relocate in this State, however, it is deemed necessary to gain
 
11 certain federal tax exemptions for such reinsurers who would take
 
12 advantage of this Act.
 
13      SECTION 2.  In order to facilitate the purpose of this Act,
 
14 the governor is directed to seek the following tax exemptions,
 
15 including the enactment of federal legislation if necessary,
 
16 under the Internal Revenue Code of 1986, as amended, for
 
17 companies doing business in this State as an admitted reinsurer
 
18 as defined in section 3 of this Act:
 
19      (1)  Either:
 
20           (A)  An exemption from all federal income taxes on the
 
21                accumulation of admitted assets to support the
 
22                full payment of all of the reinsurer's probable
 
23                maximum losses for all catastrophic property
 

 
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 1                business underwritten by the reinsurer;
 
 2           (B)  Full deduction of reserves up to the reinsurer's
 
 3                probable maximum loss exposure for all
 
 4                catastrophic property business underwritten by the
 
 5                reinsurer; or
 
 6      (2)  Reduced rates of federal income tax for qualified
 
 7           reinsurers for a period of ten years from the date of
 
 8           the first reinsurance policy written by the reinsurer
 
 9           as a qualified reinsurer in this State.
 
10      SECTION 3.  Chapter 431, Hawaii Revised Statutes, is amended
 
11 by adding a new article to be appropriately designated and to
 
12 read as follows:
 
13                             "ARTICLE
 
14                        ADMITTED REINSURERS
 
15      431:  -101  Definitions.  As used in this article:
 
16      "Admitted reinsurer" means an insurer domiciled and licensed
 
17 to do the business in this State as such by the commissioner
 
18 pursuant to section 431:  -103.
 
19      431:  -102  Formation of admitted reinsurers.  An admitted
 
20 reinsurer may be formed as a stock or mutual insurance company
 
21 with a minimum capital, in the case of a stock insurance company,
 
22 and minimum surplus, in the case of a mutual insurance company,
 
23 of not less than $30,000,000.
 

 
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 1      431:  -103  Admitted reinsurer application.  (a)  An
 
 2 applicant seeking to do business in this State as an admitted
 
 3 reinsurer pursuant to this article shall file an application with
 
 4 the commissioner on forms prescribed by the commissioner
 
 5 describing its plan of operations, general rating plans and
 
 6 policies, persons who shall be involved in the initial management
 
 7 of the company, and such other factors as the commissioner shall
 
 8 require.
 
 9      (b)  In addition to the requirements in subsection (a), an
 
10 applicant seeking to redomesticate to this State as an admitted
 
11 reinsurer shall file with the commissioner, audited financial
 
12 statements for the applicant's fiscal year immediately preceding
 
13 the year of application and certified copies of the latest report
 
14 of examination, current articles and bylaws and certificate of
 
15 compliance from the jurisdiction in which the applicant is doing
 
16 business.
 
17      (c)  If the commissioner is satisfied that the documents and
 
18 statements filed by the applicant comply with this chapter, the
 
19 commissioner may grant a license authorizing it to do reinsurance
 
20 business in this State until April 1 thereafter, at which time
 
21 the license may be renewed.
 
22      431:  -104  Permitted lines of coverage.  An admitted
 
23 reinsurer shall only be permitted to write the following lines of
 

 
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 1 insurance:
 
 2      (1)  All casualty insurance except personal lines; provided
 
 3           that the personal lines exclusion shall not apply to
 
 4           homeowner's insurance;
 
 5      (2)  All property insurance;
 
 6      (3)  Marine and transportation insurance; and
 
 7      (4)  Marine protection and indemnity insurance as provided
 
 8           in section 431:19-102(h)(3).
 
 9      431:  -105  Fees.(a)  Each admitted reinsurer shall pay
 
10 to the director        per cent on July 1, 2000 and thereafter on
 
11 the gross premiums received from all risks during the year ending
 
12 on the preceding December 31.
 
13      (b)  Each admitted reinsurer shall file with the
 
14 commissioner an annual tax statement as provided in section
 
15 431:7-201.
 
16      431:  -106  Annual reports.  Before March 1 of each year,
 
17 every admitted reinsurer shall file with the commissioner an
 
18 audited report and a statement of losses and loss reserves and
 
19 loss expense reserves certified by an actuary who holds a current
 
20 designation as either an MAAA or FCAS.
 
21      431:  -107  Applicable laws.  No other insurance laws of
 
22 this State shall apply to admitted reinsurers except those
 
23 specifically referenced in this article, and the provisions of
 

 
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                                     S.B. NO.           1448
                                                        
                                                        

 
 1 articles 1, 2, 6, 9A, 11, 13, and 15 of this chapter.
 
 2      431:  -108  Rules.  The commissioner may adopt rules
 
 3 pursuant to chapter 91 necessary to implement this article."
 
 4      SECTION 4.  This Act shall take effect on July 1, 2000,
 
 5 except that section 2 shall take effect on July 1, 1999.
 
 6 
 
 7                           INTRODUCED BY:_________________________