Report Title:

HHRF Phase Out

Description:

Creates three different funds to receive the balance remaining in the Hawaii hurricane relief fund. Establishes a loan program to be administered by the HHRF.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

101

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO INSURANCE.

 

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

SECTION 1. The legislature finds that the Hawaii hurricane relief fund, which was enacted following Hurricane Iniki in 1992 to solve a homeowners property insurance crisis, has fulfilled its purposes and should be phased out. The Hawaii hurricane relief fund was intended as a temporary measure to restore stability to the insurance market and was not intended to interfere with the private insurance market or dampen economic development in Hawaii.

The Hawaii hurricane relief fund should be reformed as a catastrophic fund for the purpose of providing relief from damage caused by natural catastrophic events such as hurricanes, tsunamis, earthquakes, windstorms, and lava.

The purpose of this Act is to:

(1) Cause the Hawaii hurricane relief fund to end its direct hurricane insurance program;

(2) Create three funds that will receive the net moneys transferred from the Hawaii hurricane relief fund as follows:

(A) The emergency natural disaster relief fund to be used by the governor for relief following a natural disaster;

(B) The natural disaster loss mitigation fund to be used by the director of commerce and consumer affairs for natural disaster loss prevention efforts; and

(C) The natural disaster re-insurance fund to be set up in the department of commerce and consumer affairs for the purpose of providing re-insurance in the event of a natural disaster that stops the availability of insurance by the private sector; and

(3) Mitigate the long-term risk posed by hurricanes through a loan program to be administered by the Hawaii hurricane relief fund.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

NATURAL DISASTERS

§ -1 Emergency natural disaster relief fund. (a) There shall be created an emergency natural disaster relief fund in the treasury of the State to be placed within the office of the governor for administrative purposes.

(b) Upon the effective date of this Act, ninety-nine per cent of the net moneys available to the Hawaii hurricane relief fund shall be transferred to the emergency natural disaster relief fund, and the remaining one per cent shall be transferred in one-half portion each to the natural disaster loss mitigation fund and the natural disaster re-insurance fund.

(c) Interest or other earnings on moneys in the emergency natural disaster relief fund shall be credited to the emergency natural disaster relief fund; provided that on the first day of July of each year beginning in 2003, one per cent of the amount in the emergency natural disaster relief fund, calculated as of May 31 of that year, shall be transferred to the natural disaster loss mitigation fund.

(d) Following the occurrence of a natural disaster in the State and the declaration of an emergency by the governor, moneys in the emergency natural disaster relief fund may be used by the governor, not subject to chapter 103D, to mitigate the impact of the damage caused by the natural disaster and to cause or assist the recovery, repair, and rehabilitation of property, persons, businesses, or institutions following the disaster. Moneys may be provided to any person, business, or governmental agency or body in the form of aid, assistance, grants, or loans. Moneys in the emergency natural disaster relief fund may also be used to pay the costs and expenses of administering and operating the emergency natural disaster relief fund.

(e) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State or its officers or employees for any action taken by them in the performance of their powers and duties with respect to the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund. Nothing in this section shall create an obligation, debt, claim, cause of action, claim for relief, charge, or any other liability of any kind whatsoever against the State or its officers and employees in favor of any person or entity without regard to whether that person or entity did receive or could have received any benefits from the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund.

§   -2 Natural disaster loss mitigation fund. (a) There shall be created a natural disaster loss mitigation fund in the treasury of the State to be placed within the department of commerce and consumer affairs for administrative purposes.

(b) Upon the effective date of this Act, one-half of one per cent of the net moneys available to the Hawaii hurricane relief fund shall be transferred to the natural disaster loss mitigation fund, one-half of one per cent shall be transferred to the natural disaster re-insurance fund, and the remaining ninety-nine per cent shall be transferred to the emergency natural disaster relief fund.

(c) On the first day of July of each year beginning in 2003, one per cent of the amount in the emergency natural disaster relief fund, calculated as of May 31 of that year, shall be transferred to the natural disaster loss mitigation fund.

(d) Interest or other earnings on moneys in the natural disaster loss mitigation fund shall be credited to the natural disaster loss mitigation fund. Investments in the natural disaster loss mitigation fund shall be subject to article 6 of chapter 431.

(e) Moneys in the natural disaster loss mitigation fund may be used by the director of commerce and consumer affairs, not subject to chapter 103D, to mitigate or reduce the risk of loss or damage to property that may result from future natural disasters. Moneys may be provided to any person, business, or governmental agency or body in the form of aid, assistance, grants, or loans. Moneys in the natural disaster loss mitigation fund may also be used to pay the costs and expenses of administering and operating the natural disaster loss mitigation fund.

(f) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State or its officers or employees for any action taken by them in the performance of their powers and duties with respect to the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund. Nothing in this section shall create an obligation, debt, claim, cause of action, claim for relief, charge, or any other liability of any kind whatsoever against the State or its officers and employees in favor of any person or entity without regard to whether that person or entity did receive or could have received any benefits from the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund.

§   -3 Natural disaster re-insurance fund. (a) There shall be created a natural disaster re-insurance fund in the treasury of the State to be placed within the department of commerce and consumer affairs for administrative purposes.

(b) Upon the effective date of this Act, one-half of one per cent of the net moneys available to the Hawaii hurricane relief fund shall be transferred to the natural disaster re-insurance fund, one-half of one per cent shall be transferred to the natural disaster loss mitigation fund, and the remaining ninety-nine per cent shall be transferred to the emergency natural disaster relief fund.

(c) On the first day of July of each year beginning in 2012, one per cent of the amount in the emergency natural disaster relief fund, calculated as of May 31 of that year, shall be transferred to the natural disaster re-insurance fund.

(d) Interest or other earnings on moneys in the natural disaster re-insurance fund shall be credited to the natural disaster re-insurance fund. Investments in the natural disaster re-insurance fund shall be subject to article 6 of chapter 431.

(e) Moneys in the natural disaster re-insurance fund may be used by the director of commerce and consumer affairs, not subject to chapter 103D, to provide a source of re-insurance to mitigate or reduce the risk of loss or damage to property that may result from future natural disasters. If the moneys in the natural disaster re-insurance fund are to be used for re-insurance, the moneys may also be used to pay the costs and expenses of administering and operating the program of re-insurance, including the hiring of personnel, not subject to chapter 76.

(f) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State or its officers or employees for any action taken by them in the performance of their powers and duties with respect to the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund. Nothing in this section shall create an obligation, debt, claim, cause of action, claim for relief, charge, or any other liability of any kind whatsoever against the State or its officers and employees in favor of any person or entity without regard to whether that person or entity did receive or could have received any benefits from the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund.

§   -4 Hawaii hurricane relief fund. (a) Upon the effective date of this Act, one-half of one per cent of the net moneys available to the Hawaii hurricane relief fund established under chapter 431P shall be transferred to the natural disaster loss mitigation fund, one-half of one per cent shall be transferred to the natural disaster re-insurance fund, and the remaining ninety-nine per cent shall be transferred to the emergency natural disaster relief fund.

(b) The board of directors of the Hawaii hurricane relief fund shall continue to oversee and administer the operations of the Hawaii hurricane relief fund to ensure that the net moneys available to the Hawaii hurricane relief fund are transferred to the emergency natural disaster relief fund, the natural disaster loss mitigation fund, and the natural disaster re-insurance fund.

(c) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State or its officers or employees, or the board of directors of the Hawaii hurricane relief fund, for any action taken by them in the performance of their powers and duties with respect to the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund. Nothing in this section shall create an obligation, debt, claim, cause of action, claim for relief, charge, or any other liability of any kind whatsoever against the State or its officers and employees, or the board of directors of the Hawaii hurricane relief fund, in favor of any person or entity without regard to whether that person or entity did receive or could have received any benefits from the Hawaii hurricane relief fund, the emergency natural disaster relief fund, the natural disaster loss mitigation fund, or the natural disaster re-insurance fund."

SECTION 3. Chapter 431P, Hawaii Revised Statutes, is amended by adding four new sections to be appropriately designated and to read as follows:

"§431P- Termination of fund operations. The fund shall provide no insurance coverage after the effective date of this Act. All fund operations, including its authorized assessments, fees, charges, surcharges, and other collection of revenues shall cease upon payment, satisfaction, discharge, release, or termination of all obligations of the fund, including obligations under its policies of hurricane property insurance, or its bonds, notes, or other indebtedness.

§431P- Transfer of net moneys following termination of fund insurance operations. Upon the effective date of this Act, ninety-nine per cent of the net moneys in the hurricane reserve trust fund shall be transferred to the emergency natural disaster relief fund, and the remaining one per cent shall be transferred in one-half portion each to the natural disaster loss mitigation fund and the natural disaster re-insurance fund.

§431P- Hurricane relief administrative procedures loan committee. (a) The board shall establish an account outside of the hurricane reserve trust fund to be known as the hurricane relief loan fund into which the board may in its sole discretion deposit up to $       annually from the hurricane reserve trust fund.

(b) The hurricane relief loan fund shall be administered by an advisory committee called the hurricane relief administrative procedures loan committee, which shall be composed of seven members as follows:

(1) The director of business, economic development, and tourism, or designee, as an ex officio member;

(2) The insurance commissioner, or designee, as an ex officio member; and

(3) Five members of financial institutions in the State, who shall be appointed by the board.

(c) The loan committee:

(1) Shall elect a chair from among its members;

(2) Shall establish, subject to the approval of the director of business, economic development, and tourism and the insurance commissioner:

(A) Procedures under which financial institutions shall access the hurricane relief loan fund, including fees, charges, the amount, and form of security; and

(B) Terms and requirements for loans or grants to homeowners to make any improvements to real property, which is at risk because of the type of structure or because it is in an area prone to hurricane damage that will increase the property's ability to withstand hurricane-force winds, for the purpose of obtaining homeowners insurance; and

(3) May request the board to employ or contract with technical experts, officers, agents, and employees, permanent or temporary, as required to assist the loan committee in effectuating its purpose.

(d) Members of the loan committee shall serve without compensation but shall be reimbursed for their actual and necessary expenses, including travel expenses, incurred in carrying out their duties.

(e) Any person having an interest in real property who has been unable to obtain a loan to increase the property's ability to withstand hurricane-force winds for the purpose of obtaining homeowners insurance may apply to a financial institution for a loan. Any person applying for such a loan may also apply for a loan or grant from the hurricane relief loan fund. Any person applying for a loan or grant from the hurricane relief loan fund shall submit to the loan committee for review and approval of the plans, specifications, and standards for the work to be performed on the real property. In addition to offering loans, the loan committee may offer grants of up to fifty per cent of the applicant's requested loan amount. The loan committee shall process the requested loan or grant based on the applicant's financial need. Upon approval by the loan committee, the applicant's lending institution may process the loan. Upon completion of the work performed on the property, a completion report shall be submitted to the loan committee.

The loan committee shall determine whether the property is located in an area of projected hurricane loss or is at risk because of the type of structure of the property. If the property is found to be located in such an area or at risk because of the type of structure, the loan committee may provide a loan or grant to the property owner pursuant to this section. The loan committee shall adopt standards for building loss mitigation to be used as the basis for loan and grant approval by the loan committee.

(f) There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member of the loan committee or any officer or employee of the State for any action taken in the performance of their duties under this section."

SECTION 4. Section 431P-1, Hawaii Revised Statutes, is amended by adding a new definition to read as follows:

""Loan committee" means the hurricane relief administrative procedures loan committee."

SECTION 5. Section 431P-16, Hawaii Revised Statutes, is amended to read as follows:

"§431P-16 Establishment of trust funds. (a) The fund shall establish outside the state treasury a hurricane reserve trust fund and any accounts thereunder and any other trust fund or account necessary to carry out the purposes of this chapter. Moneys deposited in the hurricane reserve trust fund and any accounts thereunder or any other trust fund or account shall be held by the fund, as trustee, in a depository as defined in section 38-1 or according to a similar arrangement at the discretion of the board, including, but not limited to, trust or custodial accounts created for the benefit of the fund's secured parties under contractual claims financing arrangements. These moneys may be invested and reinvested in accordance with the plan of operation. Disbursements from the trust funds shall not be subject to chapter 103D and shall be made in accordance with procedures adopted by the board.

(b) The hurricane reserve trust fund shall receive deposits of the special mortgage recording fee established by this chapter. Except as determined by board order, the special mortgage recording fee shall be imposed on each mortgage and each amendment to a mortgage which, in each case, increases the principal amount of the secured debt and which is recorded in the bureau of conveyances of the State under chapter 502 or filed with the assistant registrar of the land court of the State under chapter 501.

The special mortgage recording fee shall be an amount equal to one-tenth of one per cent of the stated principal amount of the debt secured by the mortgage or, in the case of an amendment or refinancing of a mortgage, an amount equal to one-tenth of one per cent of the amount of the increase of the stated principal amount of the secured debt; provided that the board may establish a lower special mortgage recording fee amount pursuant to section 431P-5(b)(14). With respect to an open end revolving loan, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the maximum amount which may be outstanding under the loan at any one time. With respect to a mortgage securing a nonmonetary or inchoate obligation, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the monetary amount which the mortgagee attributes to the obligation. If the debt is stated in a foreign currency, it shall be converted to U.S. dollars using an exchange rate published in a newspaper of general circulation in this State within one week prior to recordation of the mortgage or amendment of mortgage.

The special mortgage recording fee shall be in addition to any applicable fees under chapter 501 or 502. The special mortgage recording fee shall be submitted to and collected by the bureau of conveyances or the assistant registrar of the land court of the State and shall be deposited into the hurricane reserve trust fund. The special mortgage recording fee shall be submitted at the time the mortgage or amendment of mortgage is recorded together with any related forms or certifications required by the bureau of conveyances or the assistant registrar of the land court of the State.

(c) The Hawaii hurricane relief fund shall implement the assessments of all property and casualty insurers as authorized by section 431P-5(b)(8)(A) and (B) and the proceeds from the assessments shall be deposited into the hurricane reserve trust fund or into trust or custodial accounts, created for the benefit of the fund's secured parties, that are held inside or outside the hurricane reserve trust fund.

(d) If the Hawaii hurricane relief fund offers to issue policies of hurricane property insurance, the premiums for the policies shall be deposited into the hurricane reserve trust fund.

(e) After each covered event, if the board shall determine that the moneys in the hurricane reserve trust fund, excluding moneys determined by the board to be needed to continue fund operations following that covered event, will be insufficient to pay claims and other obligations of the fund arising out of that covered event, the Hawaii hurricane relief fund is authorized to levy a surcharge not to exceed seven and one-half per cent a year on premiums charged for all property and casualty insurance policies issued for risks insured in this State. These moneys may be deposited into the hurricane reserve trust fund or into trust or custodial accounts, created for the benefit of the fund's secured parties, that are held inside or outside the hurricane reserve trust fund. The formula to calculate the amount and period of the surcharge for each covered event and the procedures and methodology for payment of claims and other obligations of the fund shall be provided in the plan of operation and the surcharge may remain in effect until all claims and other obligations of the fund, including but not limited to claims financing transactions, bonds, notes, and other obligations arising out of that covered event, shall have been fully discharged. The amount and reason for any surcharge made pursuant to this subsection shall be separately stated on any billing sent to an insured. The surcharge shall not be considered premiums for any other purpose, including the computation of gross premium tax or the determination of producers' commissions.

(f) Any proceeds, experience refunds, or other return funds under reinsurance shall be deposited into the hurricane reserve trust fund.

(g) Any proceeds from loans or other moneys from the federal government, any proceeds from bonds issued pursuant to this chapter loaned by the director to the Hawaii hurricane relief fund, and other moneys as the State may make available from time to time shall be deposited into the hurricane reserve trust fund.

(h) Moneys in the hurricane reserve trust fund or in trust or custodial accounts, created for the benefit of the fund's secured parties, shall be expended by the Hawaii hurricane relief fund or its authorized designee and used solely for the purposes of this chapter.

[(i) Moneys in the hurricane reserve trust fund may be:

(1) Disbursed upon dissolution of the Hawaii hurricane relief fund; provided that:

(A) The net moneys in the hurricane reserve trust fund shall revert to the state general fund after payments by the fund on behalf of licensed property and casualty insurers or the State that are required to be made pursuant to any federal disaster insurance program enacted to provide insurance or reinsurance for hurricane risks are completed; and

(B) If such moneys are paid on behalf of licensed property and casualty insurers, payment shall be made in proportion to the premiums from policies of hurricane property insurance serviced by the insurers in the twelve months prior to dissolution of the fund; or

(2) Deposited to the loss mitigation grant fund established under section 431:22-102;

provided that all interest earned from the principal in the hurricane reserve trust fund shall be transferred and deposited into the general fund each year that the hurricane reserve trust fund remains in existence.]"

SECTION 6. Statutory material to be repealed is bracketed. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.

INTRODUCED BY:

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