REPORT TITLE:
Insurance


DESCRIPTION:
Requires the Insurance Commissioner to treat as confidential all
nonpublic financial information submitted by a captive insurer.
Provides the Insurance Commissioner with some flexibility with
regard to the accounting methods and auditors that captive
insurers other than class 3 insurers must utilize in preparing
financial reports.  (HB2219 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2219
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.



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

 1      SECTION 1.  Chapter 431, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to article 19 to be appropriately
 
 3 designated and to read as follows:
 
 4      "431:19-     Confidential treatment.  (a)  All nonpublic
 
 5 financial information of a captive insurance company, its parent,
 
 6 or the parent's member organizations, or a risk retention captive
 
 7 insurance company, disclosed to the commissioner pursuant to this
 
 8 article shall be given confidential treatment and shall not be
 
 9 made public by the commissioner without the prior written consent
 
10 of the captive insurer, its parent company, or the member
 
11 organization, or risk retention captive insurer to which it
 
12 pertains.
 
13      (b)  The commissioner may disclose nonpublic financial
 
14 information of a captive insurance company, its parent, or the
 
15 parent's member organizations, or a risk retention captive
 
16 insurance company, to insurance departments of other states
 
17 without prior consent of the captive insurer, its parent company,
 
18 or the parent's member organization, or the risk retention
 
19 captive insurer to which it pertains.
 

 
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 1      (c)  In the event the commissioner determines that the
 
 2 interest of the policyholders, shareholders, or the public will
 
 3 be served by making the information public, then after giving the
 
 4 captive insurance company and its parent or the parent's member
 
 5 organizations, or the risk retention captive insurer that would
 
 6 be affected thereby, three days notice of intent, the
 
 7 commissioner may make public all or any part of the nonpublic
 
 8 financial information in a manner that the commissioner deems
 
 9 appropriate.
 
10      (d)  For purposes of this section:
 
11      "Equity securities" means:
 
12      (1)  A share in a corporation, whether or not transferable
 
13           or denominated a "stock", or similar security
 
14           evidencing an ownership interest in the person;
 
15      (2)  The interest of a limited partner in a limited
 
16           partnership;
 
17      (3)  The interest of a partner in a partnership, including a
 
18           joint venture; or
 
19      (4)  A warrant or right, other than a right to convert, to
 
20           purchase, sell, or subscribe to a share, security, or
 
21           interest of a kind specified in paragraph (1), (2), or
 
22           (3).
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      "Nonpublic financial information" means information
 
 2 regarding a person's financial condition that prior to disclosure
 
 3 to the commissioner pursuant to this article is not a public
 
 4 record as defined in rule 1001(5) of section 626-1; provided that
 
 5 in the case of a person whose equity securities are collectively
 
 6 owned and held by thirty-six or more persons, "nonpublic
 
 7 financial information" does not include financial information
 
 8 disclosed to owners and holders of equity securities."
 
 9      SECTION 2.  Section 431:19-107, Hawaii Revised Statutes, is
 
10 amended by amending subsections (a) and (b) to read as follows:
 
11      "(a)  Each [pure] captive insurance company other than a
 
12 class 3 captive insurance company shall submit to the
 
13 commissioner a statement of financial condition written according
 
14 to generally accepted accounting principles, or other
 
15 comprehensive basis of accounting as may be deemed appropriate by
 
16 the commissioner, and audited by an independent certified public
 
17 accountant, or other qualified professional as deemed appropriate
 
18 by the commissioner, on or before the last day of the sixth month
 
19 following the end of the company's fiscal year.
 
20      (b)  Each [captive insurance company that is not a pure]
 
21 class 3 captive insurance company shall annually file with the
 
22 commissioner the following:
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (1)  Annual statement and audit:
 
 2           (A)  On or before March 1, or such day subsequent
 
 3                thereto as the commissioner upon request and for
 
 4                cause may specify, an annual statement using the
 
 5                National Association of Insurance Commissioners'
 
 6                annual statement blank plus any additional
 
 7                information required by the commissioner, which
 
 8                shall be a true statement of its financial
 
 9                condition, transactions, and affairs as of the
 
10                immediately preceding December 31.  The reported
 
11                information shall be verified by oaths of at least
 
12                two of the captive's principal officers;
 
13           (B)  On or before June 1, or such day subsequent
 
14                thereto as the commissioner upon request and for
 
15                cause may specify, an audit by a designated
 
16                independent certified public accountant or
 
17                accounting firm of the financial statements
 
18                reporting the financial condition and results of
 
19                the operation of the captive;
 
20           (C)  The annual statement and audit shall be prepared
 
21                in accordance with the National Association of
 
22                Insurance Commissioners' annual statement
 
23                instructions, following the practice and
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                procedures prescribed by the National Association
 
 2                of Insurance Commissioners' practices and
 
 3                procedures manuals.  Each risk retention group
 
 4                shall also comply with section 431:3-302; and
 
 5      (2)  On or before each March 1, or such day subsequent
 
 6           thereto as the commissioner upon request and for cause
 
 7           may specify, a risk-based capital report in accordance
 
 8           with section 431:3-402; provided that a class 3
 
 9           [association] captive insurance [companies and class 4
 
10           captive insurance companies] company shall not be
 
11           required to file [their] risk-based capital reports
 
12           with the National Association of Insurance
 
13           Commissioners."
 
14      SECTION 3.  Section 431:19-102.5, Hawaii Revised Statutes,
 
15 is repealed.
 
16      ["[431:19-102.5]  Confidential treatment.  All nonpublic
 
17 financial information of a captive insurance company and of its
 
18 parent or its member organizations, or a risk retention captive
 
19 insurance company, disclosed to the commissioner pursuant to
 
20 section 431:19-102 shall be given confidential treatment and
 
21 shall not be made public by the commissioner, except to insurance
 
22 departments of other states, without the prior written consent of
 
23 the captive insurer or parent company or member organization or
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 risk retention captive insurer to which it pertains.  In the
 
 2 event the commissioner determines that the interest of the
 
 3 policyholders, shareholders, or the public will be served by
 
 4 making the information public, then after giving the captive
 
 5 insurance company and its parent or member organizations or risk
 
 6 retention captive insurer which would be affected thereby three
 
 7 days notice of intent, the commissioner may make public all or
 
 8 any part thereof in such manner as the commissioner deems
 
 9 appropriate.
 
10      For purposes of this section, "nonpublic financial
 
11 information" means information regarding a person's financial
 
12 condition that prior to disclosure to the commissioner pursuant
 
13 to section 431:19-102 is not a public record as defined in rule
 
14 1001(5) of section 626-1.  In the case of a person whose equity
 
15 securities are collectively owned and held by thirty-six or more
 
16 persons, "nonpublic financial information" does not include
 
17 financial information disclosed to owners and holders of equity
 
18 securities.  As used herein, equity securities means:
 
19      (1)  A share in a corporation, whether or not transferable
 
20           or denominated a "stock", or similar security
 
21           evidencing an ownership interest in the person;
 
22      (2)  Interest of a limited partner in a limited partnership;
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (3)  Interest of a partner in a partnership, including a
 
 2           joint venture; or
 
 3      (4)  A warrant or right, other than a right to convert, to
 
 4           purchase, sell, or subscribe to a share, security, or
 
 5           interest of a kind specified in [paragraph] (1), (2),
 
 6           or (3)."]
 
 7      SECTION 4.  Statutory material to be repealed is bracketed.
 
 8 New statutory material is underscored.
 
 9      SECTION 5.  This Act shall take effect upon its approval.