Captive Insurance Co.

Authorizes the establishment of a State-owned captive insurance
company to insure the general liabilities of state agencies.
Appropriates funds for a study on expanding the scope of the
risks insured by the State's captive insurance company.  (CD1)

THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                H.D. 1
STATE OF HAWAII                                            C.D. 1

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The purpose of this Act is to grant the state
 2 comptroller sufficient authority to establish a captive insurance
 3 company, which will be owned by the State, to insure the general
 4 liabilities of state agencies pursuant to chapter 41D, Hawaii
 5 Revised Statutes.
 6      The State currently self-insures a substantial portion of
 7 its assets, and current insurance policies already maintain
 8 deductibles between $50,000 and $3,000,000 per occurrence.  In
 9 return, the State pays nearly $5,000,000 in premiums per year.
10 The State will save money under the proposed scheme since the
11 state-owned captive insurance company will allow the State direct
12 access to the discounted premium rates available in the
13 reinsurance market.
14      SECTION 2.  Section 41D-1, Hawaii Revised Statutes, is
15 amended by adding a new definition to be appropriately inserted
16 and to read as follows:
17      ""Captive insurance company" shall have the same meaning as
18 captive insurance company in section 431:19-101."
19      SECTION 3.  Section 41D-2, Hawaii Revised Statutes, is 

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 1 amended by amending subsection (a) to read as follows:
 2      "(a)  The comptroller, through the risk manager, shall:
 3      (1)  Have discretion to purchase casualty insurance for the
 4           State or state agencies, including those employees of
 5           the State who, in the comptroller's discretion, may be
 6           at risk and shall be responsible for the acquisition of
 7           all casualty insurance;
 8      (2)  Have discretion to purchase property insurance for the
 9           State or state agencies and shall acquire all property
10           insurance;
11      (3)  Direct and manage all risk management and insurance
12           programs of the State, except for employee benefits
13           insurance and workers' compensation insurance programs
14           or as otherwise provided in chapters 87, 88, 383 to
15           386A, 392, and 393;
16      (4)  Consult with state agencies to determine what property,
17           casualty, and other insurance policies are presently in
18           force or are sought by the state agencies and to make
19           determinations about whether to continue subscribing to
20           insurance policies.  In the event that the risk
21           manager's determination is not satisfactory to the
22           state agency, the state agency may have the risk
23           manager's decision reviewed by the comptroller.  In

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 1           this case, the comptroller's decision shall be final;
 2      (5)  Consolidate and combine state insurance coverages, and
 3           purchase excess insurance when, in the comptroller's
 4           discretion, it is appropriate to do so;
 5      (6)  Acquire risk management, investigative, claims
 6           adjustment, actuarial, and other services, except
 7           attorney's services, as may be required for the sound
 8           administration of this chapter;
 9      (7)  Gather from all state agencies and maintain data
10           regarding the State's risks and casualty, property, and
11           fidelity losses;
12      (8)  In conjunction with the attorney general and as
13           otherwise provided by this chapter, compromise or
14           settle claims cognizable under chapter 662;
15      (9)  Provide technical services in risk management and
16           insurance to state agencies; [and]
17     (10)  Be authorized to establish a captive insurance company
18           pursuant to article 19 of chapter 431 to effectuate the
19           purposes of this chapter; and
20    [(10)] (11)  Do all other things appropriate to the
21           development of sound risk management practices and
22           policies for the State."
23      SECTION 4.  Section 41D-8.5, Hawaii Revised Statutes, is

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 1 amended to read as follows:
 2      "[[]41D-8.5[]]  Insurance for indemnification.  The
 3 comptroller may [obtain]:
 4      (1)  Obtain sufficient loss insurance to cover the liability
 5           of the State that may arise from indemnity provisions
 6           agreed to pursuant to section 29-15.5[.]; and
 7      (2)  Obtain appropriate and sufficient reinsurance to cover
 8           the liability of a captive insurance company
 9           established pursuant to section 41D-2."
10      SECTION 5.  The insurance division shall prepare a study of
11 the feasibility and cost effectiveness of providing insurance
12 coverage for damage to real property suffered by the State as a
13 result of fire, flood, or hurricane, and all other insurance
14 coverage that the insurance commissioner deems appropriate and
15 within the scope of chapter 41D, Hawaii Revised Statutes, through
16 a captive insurance facility established pursuant to chapter 431,
17 Hawaii Revised Statutes.  The insurance commissioner shall submit
18 the insurance commissioner's findings and recommendations,
19 including any proposed legislation, to the legislature no later
20 than twenty days before the convening of the regular session of
21 2001.
22      SECTION 6.  There is appropriated out of the captive
23 insurance administrative fund the sum of $100,000, or so much

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 1 thereof as may be necessary, for fiscal year 1999-2000 to carry
 2 out the purposes of this Act.  The sum appropriated shall be in
 3 addition to the moneys transferred to the insurance regulation
 4 fund pursuant to section 431:19-101.8, Hawaii Revised Statutes.
 5 The insurance commissioner shall transfer the appropriation
 6 authorized by this Act to the insurance regulation fund.  The sum
 7 appropriated shall be expended by the department of commerce and
 8 consumer affairs.
 9      SECTION 7.  Statutory material to be repealed is bracketed.
10 New statutory material is underscored.
11      SECTION 8.  This Act shall take effect upon its approval;
12 provided that section 6 shall take effect on July 1, 2000.