Report Title:

HHRF Repeal; Hawaii Catastrophic Relief Fund

Description:

Establishes a Hawaii catastrophic relief fund (HCRF) to provide reinsurance for the risks of catastrophic events in Hawaii and to mitigate the impact of a catastrophic or emergency condition in Hawaii; repeals the Hawaii Hurricane Relief Fund (HHRF); transfers monies from HHRF to HCRF.

THE SENATE

S.B. NO.

3005

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to the hawaii catastrophic relief fund.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

HAWAII CATASTROPHIC RELIEF FUND

-1 Definitions. As used in this chapter, unless the context otherwise requires:

"Board" means the board of directors of the Hawaii catastrophic relief fund.

"Catastrophe" means a violent, destructive natural event that includes and is limited to a tsunami, earthquake, or volcanic eruption.

"Commissioner" means the insurance commissioner as defined in section 431:2-102.

"Earthquake" means a shaking or trembling of the earth measuring 5.5 or greater on the Richter scale that is volcanic or tectonic in origin.

"Fund" means the Hawaii catastrophic relief fund.

"Hurricane" means a storm that has been declared and defined by the Central Pacific Hurricane Center of the National Weather Service to be a hurricane.

"Plan of operation" means the plan for providing reinsurance as adopted by the board of directors of the Hawaii catastrophic relief fund, and any amendments thereto, under section -5.

"Tsunami" means one or a series of huge sea waves caused by an earthquake, volcanic activity, or other large-scale disturbance of the ocean floor.
"Volcanic eruption" means a geologic event in which lava, ash, rocks, gases, and other materials explode, issue, or are extruded from fissures in the earth.

-2 Establishment of Hawaii catastrophic relief fund. There shall be established a Hawaii catastrophic relief fund to be placed within the department of commerce and consumer affairs for administrative purposes. The fund shall be a public body and a body corporate and politic. The fund shall provide reinsurance for the risks of catastrophic events in Hawaii.

-3 Board of directors. (a) The board of directors of the fund shall consist of the insurance commissioner as an ex officio voting member and six members appointed by the governor in accordance with section 26-34 and as follows:

(1) Two members shall, by and with the advice and consent of the senate, be appointed by the governor for a term of four years; provided that of the initial appointees, one shall be appointed for a two-year term. A vacancy on the authority of a seat subject to this paragraph shall be filled in accordance with article V, section 6 of the Constitution of the State of Hawaii;

(2) Two members shall, by and with the advice and consent of the senate, be appointed by the governor from a list of nominations submitted by the president of the senate. The members appointed from a list of nominations of the president of the senate shall serve for a term of four years; provided that of the initial appointees, one shall be appointed for a two-year term; and

(3) Two members shall, by and with the advice and consent of the senate, be appointed by the governor from a list of nominations submitted by the speaker of the house of representatives. The members appointed from a list of nominations of the speaker of the house of representatives shall serve for a term of four years; provided that of the initial appointees, one shall be appointed for a two-year term.

The governor shall select a chairperson and vice-chairperson from among the members.

(b) The board shall be the policy-making body of the fund. As such, the board shall be responsible for establishing policies for the administration and operation of the fund and the performance of other duties and functions assigned to the fund. The board shall meet as often as necessary to formulate and implement strategies and plans of operation in furtherance of this chapter. Upon its appointment, the board shall adopt an interim plan of operation within ninety days.

(c) The appointed directors shall receive no compensation for services, but shall be entitled to reimbursement of necessary expenses, including travel expenses, incurred in the performance of their duties.

(d) The board may appoint, not subject to chapter 76, an executive director of the fund whose salary shall be set by the board. The board may employ, not subject to chapter 76, technical experts and officers, agents, and employees, permanent or temporary, as required. The board may also contract with persons, not subject to chapters 76, 77, and 78 when in the determination of the board, the services to be performed are unique and essential to the execution of the functions of the fund.

-4 Powers, duties, and functions. (a) The fund shall have the following general powers:

(1) To sue and be sued;

(2) To make and alter policies for its organization and internal administration;

(3) To adopt rules in accordance with chapter 91 to effectuate the purposes of this chapter;

(4) To borrow moneys, including but not limited to moneys from state or federal sources and to issue notes or other obligations of the fund for the purposes of providing funds for any of its purposes as authorized by the legislature from time to time;

(5) To pledge, assign, or grant a security interest in all or any part of the moneys, rents, charges, assessments, or other revenue, and any proceeds thereof derived by the fund; provided that any pledge, assignment, or grant of security interest shall constitute a lien and security interest on such money, rents, charges, assessments, or other revenue, and any proceeds thereof to the extent and with the priority set forth in the document establishing the pledge, assignment, or security interest, without the necessity for physical delivery, recording, or further act; and provided further that in effectuating any pledge, assignment, or grant of security interest, the fund may do either or both of the following:

(A) Transfer possession of collateral to its secured parties; or

(B) Execute and cause to be filed at the bureau of conveyances of the State of Hawaii, Uniform Commercial Code financing statements for the purpose of providing notice to third parties of a pledge, assignment, or grant of security interest; provided that any failure to file a financing statement or the filing of a financing statement that contains incomplete or inaccurate information shall not affect the perfected lien and security interest of the pledge, assignment, or grant of security interest;

(6) Enter into contracts as necessary to effectuate the purposes of this chapter;

(7) Establish business and corporate entities or organizations pursuant to the purposes of this chapter; and

(8) Perform any and all acts reasonably necessary to carry out the purposes of this chapter.

(b) In addition to the general powers under subsection (a), the fund shall have the specific power to adopt and administer a plan of operation and a manual of rules in accordance with section -5 to provide reinsurance for the risks of catastrophic events in Hawaii;

-5 Plan of operation. (a) The fund shall adopt a plan of operation and a manual of rules necessary or suitable to ensure both the solvency and the reasonable and equitable administration of the fund. The adoption of or amendments to the plan of operation and manual of rules shall not be subject to chapter 91.

(b) If the fund fails to adopt a plan of operation, or the fund fails to adopt amendments to the plan of operation, the commissioner shall adopt a plan of operation or make amendments necessary to carry out the purposes of this chapter. Any plan of operation or amendment adopted by rule of the commissioner shall continue in full force and effect until the rule is superseded by a plan of operation or amendment adopted by a majority vote of all members of the fund's board, and approved by the commissioner.

(c) The plan of operation shall:

(1) Establish procedures for performance of all powers and duties of the fund;

(2) Provide for and adopt all necessary forms for use by the fund;

(3) Establish procedures for processing and maintaining records of the fund relating to its financial transactions, its agents, its employees, and its operations; and

(4) Develop a plan for the investment of moneys held by the fund subject to the limitations in article 6 of chapter 431.

-6 Annual statements. (a) The fund shall submit to the commissioner each year, not later than one hundred twenty days after the end of the fund's fiscal year, a financial report in a form approved by the commissioner.

(b) The commissioner may require other reports concerning the fund as the commissioner deems appropriate.

-7 Powers of the commissioner. (a) For the purpose of ascertaining the fund's condition or compliance with this chapter, the commissioner shall examine the accounts, records, documents, and transactions of the fund at least once every three years or more often if the commissioner deems advisable. The fund shall pay all reasonable and actually incurred expenses of the examination in accordance with section 431:2-306(b); provided that a detailed estimate of the expenses to be incurred shall be approved by the board prior to the examination. In the event the actual expenses incurred are in excess of ten per cent of the estimate, the commissioner shall communicate in writing to the board the reason for the excess expenses.

(b) The commissioner may exercise all of the commissioner's powers provided by law in the supervision and regulation of the fund and any other person or entity subject to the jurisdiction of the commissioner.

-8 Immunity and limitation on liability. There shall be no liability on the part of, and no cause of action against the fund or its agents, employees, or board; the State; the commissioner; or the commissioner's representatives for any action taken by them in the performance of their powers and duties under this chapter; provided that this section shall not be construed to prohibit any exercise of the commissioner's power pursuant to this chapter or any other law or rule adopted pursuant to law or chapters 661 and 662, any other law to the contrary notwithstanding.

Nothing in this chapter shall create an obligation, debt, claim, cause of action, claim for relief, charge, or any other liability of any kind whatsoever in favor of any person or entity without regard to whether that person or entity received any benefits under this chapter, against the State, or its officers and employees. The State and its officers and employees shall not be liable for the results of any application, denial of application, claim, loss, or other benefits provided by the fund pursuant to this chapter. Nothing in this chapter shall be construed as authorizing any claim against the State whatsoever, nor shall this chapter be construed as authorizing any claim against the fund in excess of any note, loan, liability, or other obligation incurred by the fund. Nothing in this section shall be construed to alter any obligation to pay assessments or charges authorized to be imposed or levied by the board pursuant to this chapter. The fund shall be subject to chapter 431 only as provided for in this chapter.

-9 Establishment of trust funds. (a) The board shall establish outside the state treasury a Hawaii catastrophic relief 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 Hawaii catastrophic relief 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) Any proceeds, interest, or other earnings on moneys in the fund, legislative appropriations, and other moneys as the State may make available from time to time shall be deposited into the fund.

(c) Moneys in the Hawaii catastrophic relief fund or in trust or custodial accounts, created for the benefit of the fund's secured parties, shall be expended by the Hawaii catastrophic relief fund or its authorized designee and used solely for the purposes of this chapter; provided that moneys in the fund not held for the benefit of the fund's secured parties may be expended upon legislative appropriation to mitigate the impact caused by a catastrophic or other emergency condition and assist the recovery, repair, and rehabilitation of property, persons, businesses, or institutions affected by the catastrophic or emergency condition."

SECTION 2. Section 36-27, Hawaii Revised Statutes, is amended to read as follows:

"36-27 Transfers from special funds for central service expenses. Except as provided in this section, and notwithstanding any other law to the contrary, from time to time, the director of finance, for the purpose of defraying the prorated estimate of central service expenses of government in relation to all special funds, except the:

(1) Special out-of-school time instructional program fund under section 302A-1310;

(2) School cafeteria special funds of the department of education;

(3) Special funds of the University of Hawaii;

(4) State educational facilities improvement special fund;

(5) Convention center enterprise special fund under section 201B-8;

(6) Special funds established by section 206E-6;

(7) Housing loan program revenue bond special fund;

(8) Housing project bond special fund;

(9) Aloha Tower fund created by section 206J-17;

(10) Funds of the employees' retirement system created by section 88-109;

(11) Unemployment compensation fund established under section 383-121;

(12) Hawaii [hurricane] catastrophic relief fund established under chapter [431P;] ;

(13) Hawaii health systems corporation special funds;

(14) Tourism special fund established under section 201B-11;

(15) Universal service fund established under chapter 269;

(16) Integrated tax information management systems special fund under section 231-3.2;

(17) Emergency and budget reserve fund under section 328L-3;

(18) Public schools special fees and charges fund under section 302A-1130(f);

(19) Sport fish special fund under section 187A-9.5;

(20) Neurotrauma special fund under section 321H4;

(21) Deposit beverage container deposit special fund under section 342G-104;

(22) Glass advance disposal fee special fund established by section 342G-82; and

(23) Center for nursing special fund under section 304D-5;

shall deduct five per cent of all receipts of all other special funds, which deduction shall be transferred to the general fund of the State and become general realizations of the State. All officers of the State and other persons having power to allocate or disburse any special funds shall cooperate with the director in effecting these transfers. To determine the proper revenue base upon which the central service assessment is to be calculated, the director shall adopt rules pursuant to chapter 91 for the purpose of suspending or limiting the application of the central service assessment of any fund. No later than twenty days prior to the convening of each regular session of the legislature, the director shall report all central service assessments made during the preceding fiscal year."

SECTION 3. Section 36-30, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each special fund, except the:

(1) Transportation use special fund established by section 261D-1;

(2) Special out-of-school time instructional program fund under section 302A-1310;

(3) School cafeteria special funds of the department of education;

(4) Special funds of the University of Hawaii;

(5) State educational facilities improvement special fund;

(6) Special funds established by section 206E-6;

(7) Aloha Tower fund created by section 206J-17;

(8) Funds of the employees' retirement system created by section 88-109;

(9) Unemployment compensation fund established under section 383-121;

(10) Hawaii [hurricane] catastrophic relief fund established under chapter [431P;] ;

(11) Convention center enterprise special fund established under section 201B-8;

(12) Hawaii health systems corporation special funds;

(13) Tourism special fund established under section 201B-11;

(14) Universal service fund established under chapter 269;

(15) Integrated tax information management systems special fund under section 231-3.2;

(16) Emergency and budget reserve fund under section 328L-3;

(17) Public schools special fees and charges fund under section 302A-1130(f);

(18) Sport fish special fund under section 187A-9.5;

(19) Neurotrauma special fund under section 321H-4;

(20) Center for nursing special fund under section 304D-5; and

(21) Passenger facility charge revenue fund established by section 261-5.5;

shall be responsible for its pro rata share of the administrative expenses incurred by the department responsible for the operations supported by the special fund concerned."

SECTION 4. Section 39-51, Hawaii Revised Statutes, is amended as follows:

1. By amending the definitions of "revenue" and "revenue bonds" to read:

""Revenue" means the moneys collected, including any moneys collected from the State or any department, or any county or board, agency, or instrumentality thereof, from the rates, rentals, fees, and charges prescribed for the use and services of, and the facilities and commodities furnished by, an undertaking or the use and services and benefits of a loan program[; provided that the term shall include all insurance premium payments, assessments, surcharges, investment earnings, and all other income of the Hawaii hurricane relief fund].

"Revenue bonds" means all bonds payable solely from and secured by the revenue, or user taxes, or any combination of both, of an undertaking or loan program or any loan made thereunder for which bonds are issued and as otherwise provided in this part[; provided that the term shall include all bonds issued by the director of finance under the authority of section 10(a), Act 339, Session Laws of Hawaii 1993, as amended, for the purposes of the hurricane bond loan fund]."

2. By deleting the definition of "policy of hurricane property insurance."

[""Policy of hurricane property insurance" means a policy or endorsement of insurance issued by the Hawaii hurricane relief fund under section 431P-10."]

SECTION 5. Section 39-52, Hawaii Revised Statutes, is amended to read as follows:

"39-52 Declaration of policy. It is declared to be the policy of the State that any department acquiring, purchasing, constructing, reconstructing, improving, bettering, or extending an undertaking or establishing or administering a loan program pursuant to this chapter [or providing policies of hurricane property insurance to the general public,] shall manage the undertaking[,] or loan program[, or the Hawaii hurricane relief fund] in the most efficient manner consistent with sound economy and public advantage, and consistent with the protection of bondholders."

SECTION 6. Section 39-54, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The issuance of revenue bonds for the acquisition, purchase, construction, reconstruction, improvement, betterment, or extension of any undertaking[;] or the establishment and administration of any loan program authorized by law[; or the coverage of policies of hurricane property insurance issued by the Hawaii hurricane relief fund] shall be authorized:

(1) By a resolution or resolutions of the governing body of the department, which may be adopted at the same meeting at which the same are introduced by a majority of all the members of the governing body of the department then in office, and shall take effect immediately upon filing with the director of finance; or

(2) By a certificate or certificates of a department head, which shall take effect immediately upon filing with the director of finance."

SECTION 7. Section 39-60, Hawaii Revised Statutes, is amended to read as follows:

"39-60 Covenants in resolution or certificate authorizing issuance of revenue bonds. Any resolution or certificate authorizing the issuance of revenue bonds pursuant to this part may contain covenants as to:

(1) The purpose or purposes to which the proceeds of sale of the revenue bonds shall be applied and the use and disposition thereof;

(2) The use and disposition of the revenue of the undertaking[, the Hawaii hurricane relief fund,] or the loan program for which the revenue bonds are to be issued, or the user taxes derived therefrom, or both revenue and user taxes, to the extent pledged to the payment of the revenue bonds, including the priority of payments from the revenue and the creation and maintenance of reserves and the investment thereof;

(3) The issuance of other or additional revenue bonds payable from the revenue of the loan program[, the Hawaii hurricane relief fund,] or of the undertaking, or the user taxes derived therefrom, or both revenue and user taxes, to the extent pledged to the payment of the revenue bonds;

(4) The operation, maintenance, and repair of the undertaking or the administration, operation, and maintenance of the loan program[, or the Hawaii hurricane relief fund];

(5) The insurance to be carried on an undertaking [or on the security for the Hawaii hurricane relief fund,] or a loan program and the use and disposition of insurance proceeds, the insurance policies being by this section authorized to be carried, and no undertaking shall have recourse to the state insurance fund for the repair or replacement of any property in the undertaking, or for payment of claims under chapter 386 (relating to workers' compensation);

(6) Books of account and the inspection and audit thereof; and

(7) The terms and conditions upon which the holders of the revenue bonds or any proportion of them or any trustee therefor shall be entitled to the appointment of a receiver by any court of competent jurisdiction, which court shall have jurisdiction in the proceedings, and which receiver may enter and take possession of the undertaking, operate, maintain, and repair the same, enforce or foreclose loans made under a loan program, impose and prescribe rates, rentals, fees, or charges, collect, receive, and apply all revenue, and receive and apply all user taxes, thereafter arising therefrom in the same manner and to the same extent as the department itself might do;

provided that all covenants shall be subject to review by the governor; and provided further that the provisions of this section with respect to user taxes shall be applicable only if the legislature in the specific act or acts authorizing the issuance of the revenue bonds has provided that the revenue bonds may be paid from and secured by the user taxes derived from an undertaking.

The provisions of this part and any resolution or certificate shall be a contract with the holder or holders of the revenue bonds. The duties of the department, its governing body and department head, pursuant to this part, and any resolution or certificate shall be enforceable by any bondholder, by mandamus or other appropriate suit, action, or proceeding in any court of competent jurisdiction."

SECTION 8. Section 39-62, Hawaii Revised Statutes, is amended to read as follows:

"39-62 Use of revenue and user taxes by any undertaking[,] or loan program[, or the Hawaii hurricane relief fund]. Whenever any revenue bonds have been issued pursuant to this part for an undertaking[,] or a loan program, [or the Hawaii hurricane relief fund,] the revenue, or the user taxes, or combination of both, of the undertaking, loan program, or fund from which the revenue bonds are payable and by which they are secured shall be deposited in a special fund and shall be appropriated, applied, or expended in the amount necessary therefor for the following purposes and in the order of priority as the department shall provide in the resolution or certificate authorizing the issuance of revenue bonds pursuant to this part:

(1) To pay when due all revenue bonds and interest thereon issued for the undertaking[,] or loan program[, or the Hawaii hurricane relief fund] for the payment of which the revenue, or user taxes, or combination of both, is or shall have been pledged, charged, or otherwise encumbered, including reserves therefor;

(2) To pay or provide for the payment of the cost of operation, maintenance, and repair of the undertaking, or to pay or provide for the payment of administering, operating, and maintaining the loan program, including reserves therefor;

(3) For such purposes, within the jurisdiction, powers, duties, and functions of the department, including the creation and maintenance of reserves, as shall have been covenanted in any resolution or resolutions or certificate or certificates of the department providing for the issuance of revenue bonds;

(4) To reimburse the general fund of the State for all bond requirements for general obligation bonds which are or shall have been issued for the undertaking, loan program, [or the Hawaii hurricane relief fund,] or to refund any general obligation bonds, except insofar as the obligation of reimbursement has been or shall be canceled by the legislature, the bond requirements being the interest on term and serial bonds, sinking fund for term bonds, and principal of serial bonds maturing the following year;

(5) To provide for betterments and improvements to the undertaking or expansion of the loan program [or the Hawaii hurricane relief fund], including reserves therefor; and

(6) To provide special reserve funds and other special funds as are or may be created by law.

The appropriation, application, or expenditure of amounts deposited in the special fund pursuant to this section shall be accounted for on a fiscal year basis. Unless and until adequate provision has been made for the foregoing purposes, the State shall not have the right to transfer to its general fund or any special fund or to apply to any other purposes any part of the revenue or user taxes pledged to the payment of revenue bonds of the undertaking or loan program."

SECTION 9. Section 431:13-104, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) Nothing in this section shall prevent a person who lends money or extends credit from assisting a mortgagor, borrower, or purchaser in obtaining homeowners insurance where the borrower requests such assistance in writing. [Nothing in this section shall prevent a person who lends money or extends credit from referring a mortgagor, borrower, or purchaser to the Hawaii hurricane relief fund.]"

SECTION 10. Section 431:14A-103, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Notwithstanding any other law to the contrary, the company shall be excluded from the surplus requirements of domestic mutual insurers from January 1, 1997, through December 31, 2007. [The company is also excluded during this time period from any assessments by the Hawaii hurricane relief fund otherwise required by section 431P-5(b)(8); provided that the exclusion shall apply to the first $25,000,000 of written premiums in each calendar year; and provided further that annual written premiums in excess of $25,000,000 shall be assessed in accordance with section 431P-5(b)(8).]"

SECTION 11. Chapter 431P, Hawaii Revised Statutes, is repealed.

SECTION 12. Upon the establishment of the Hawaii catastrophic relief fund by the board of directors of the fund pursuant to -9, the net funds of the Hawaii hurricane relief fund shall be deposited into the Hawaii catastrophic relief fund.

SECTION 13. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 14. This Act shall take effect upon its approval; provided that section 11 shall take effect upon the establishment of the Hawaii catastrophic relief fund by the

board of directors of the fund pursuant to -9, Hawaii Revised Statutes.

INTRODUCED BY:

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