Insurance Producers; Surplus Lines Brokers; Retaliatory Tax Credit; Limited Lines Adjuster License; Continuing Education Credits
Makes numerous updates to the Insurance Code. Clarifies allowable insurer investments to meet capital and reserve requirements. Sets a time limit for insurers to claim the Retaliatory Tax Credit. Limits the issuance of surplus lines broker licenses to certain insurance lines of authority. Allows a limited adjuster license for crop insurance claims. Amends the continuing education credit hours required for insurance produce license renewals. Makes printed form filings optional for insurance rate filings in accordance with state plans to begin accepting electronic rate filings and payments for all lines of insurance. (HB1074 HD1)
HOUSE OF REPRESENTATIVES
TWENTY-FIFTH LEGISLATURE, 2009
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO INSURANCE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 26-9, Hawaii Revised Statutes, is amended by amending subsection (o) to read as follows:
"(o) Every person licensed under any chapter within the jurisdiction of the department of commerce and consumer affairs and every person licensed subject to chapter 485A or registered under chapter 467B shall pay upon issuance of a license, permit, certificate, or registration a fee and a subsequent annual fee to be determined by the director and adjusted from time to time to ensure that the proceeds, together with all other fines, income, and penalties collected under this section, do not surpass the annual operating costs of conducting compliance resolution activities required under this section. The fees may be collected biennially or pursuant to rules adopted under chapter 91, and shall be deposited into the special fund established under this subsection. Every filing pursuant to chapter 514E or section 485A‑202(a)(26) shall be assessed, upon initial filing and at each renewal period in which a renewal is required, a fee that shall be prescribed by rules adopted under chapter 91, and that shall be deposited into the special fund established under this subsection. Any unpaid fee shall be paid by the licensed person, upon application for renewal, restoration, reactivation, or reinstatement of a license, and by the person responsible for the renewal, restoration, reactivation, or reinstatement of a license, upon the application for renewal, restoration, reactivation, or reinstatement of the license. If the fees are not paid, the director may deny renewal, restoration, reactivation, or reinstatement of the license. The director may establish, increase, decrease, or repeal the fees when necessary pursuant to rules adopted under chapter 91. The director may also increase or decrease the fees pursuant to section 92-28.
There is created in the state treasury a
special fund to be known as the compliance resolution fund to be expended by
the director's designated representatives as provided by this subsection. Notwithstanding
any law to the contrary, all revenues, fees, and fines collected by the
department shall be deposited into the compliance resolution fund.
Unencumbered balances existing on June 30, 1999, in the cable television fund
under chapter 440G, the division of consumer advocacy fund under chapter 269,
the financial institution examiners' revolving fund, section 412:2-109, the
special handling fund, section 414‑13, and unencumbered balances existing
on June 30, 2002, in the insurance regulation fund, section 431:2-215, shall be
deposited into the compliance resolution fund. This provision shall not apply
to the drivers education fund underwriters fee, [
431:10C‑115[ ,] and 431:10G-107, insurance premium taxes and
revenues, revenues of the workers' compensation special compensation fund,
section 386-151, the captive insurance administrative fund, section 431:19‑101.8,
the insurance commissioner's education and training fund, section 431:2-214,
the medical malpractice patients' compensation fund as administered under
section 5 of Act 232, Session Laws of Hawaii 1984, and fees collected for
deposit in the office of consumer protection restitution fund, section 487‑14,
the real estate appraisers fund, section 466K‑1, the real estate recovery
fund, section 467‑16, the real estate education fund, section 467‑19,
the contractors recovery fund, section 444‑26, the contractors education
fund, section 444‑29, the condominium management education fund, section
514A-131, and the condominium education trust fund, section 514B-71. Any law
to the contrary notwithstanding, the director may use the moneys in the fund to
employ, without regard to chapter 76, hearings officers and attorneys. All
other employees may be employed in accordance with chapter 76. Any law to the
contrary notwithstanding, the moneys in the fund shall be used to fund the
operations of the department. The moneys in the fund may be used to train
personnel as the director deems necessary and for any other activity related to
As used in this subsection, unless otherwise required by the context, "compliance resolution" means a determination of whether:
(1) Any licensee or applicant under any chapter subject to the jurisdiction of the department of commerce and consumer affairs has complied with that chapter;
(2) Any person subject to chapter 485A has complied with that chapter;
(3) Any person submitting any filing required by chapter 514E or section 485A‑202(a)(26) has complied with chapter 514E or section 485A-202(a)(26);
(4) Any person has complied with the prohibitions against unfair and deceptive acts or practices in trade or commerce; or
(5) Any person subject to chapter 467B has complied with that chapter;
and includes work involved in or supporting the above functions, licensing, or registration of individuals or companies regulated by the department, consumer protection, and other activities of the department.
The director shall prepare and submit an annual report to the governor and the legislature on the use of the compliance resolution fund. The report shall describe expenditures made from the fund including non-payroll operating expenses."
SECTION 2. Section 431:2-215, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
assessments, fees, fines, penalties, and reimbursements collected by or on
behalf of the insurance division under title 24, except for the commissioner's
education and training fund (section 431:2-214), the patients' compensation
fund (Act 232, Session Laws of Hawaii 1984), the drivers education fund
underwriters fee [
(section] (sections 431:10C-115[ ),] and
431:10G-107), and the captive insurance administrative fund (section
431:19-101.8) to the extent provided by section 431:19-101.8(b), shall be
deposited into the compliance resolution fund under section 26-9(o). All sums
transferred from the insurance division into the compliance resolution fund may
be expended by the commissioner to carry out the commissioner's duties and
obligations under title 24."
SECTION 3. Section 431:3-302.5, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:
audit required in subsection (a) and the audited, consolidated, or combined
financial statements as may be approved under subsection (b) shall be prepared
in accordance with either the National Association of Insurance
Commissioners' annual statement instructions, following the practices and
procedures prescribed by the National Association of Insurance Commissioners'
accounting practices and procedure manuals[
.], or rules adopted by
SECTION 4. Section 431:6-317, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
meet the requirements under section 431:6-201, an [
An] insurer may invest
any of its funds in common shares of stock that are filed with the SVO or are considered
"filing exempt" by the Purposes and Procedures Manual of the SVO, or its
successor publication, provided that [ In aggregate,] an insurer's amount of investment in common stocks[ ,]
and in non-dividend paying stocks made pursuant to this section and in
common trust funds, mutual funds, and exchange traded funds [ including investments]
made pursuant to section 431:6-322[ , and non-dividend paying stocks,] shall
not exceed the greater of twenty-five per cent of its admitted assets or one hundred
per cent of its surplus as regards to policyholders as defined in section 431:6-101."
2. By amending subsection (c) to read:
"(c) An insurer's
aggregate amount of investment in non-dividend paying stocks [
be subject to the limitations [ of] in section 431:6-104."
SECTION 5. Section 431:6-322, Hawaii Revised Statutes, is amended to read as follows:
Common trust funds; mutual funds; and exchange traded funds. [
to the limitations in subsections (b) and (c), an insurer may invest in: (1) A bank's
common trust fund as defined in Section 584 of the United States Internal
Revenue Code of 1986, as amended; (2) The securities
of any open-end management type investment company or investment trust registered
with the federal Securities and Exchange Commission under the Investment Company
Act of 1940, as amended, if the investment company or trust, other than one of which
as a subsidiary of the insurer is investment adviser or principal underwriter, has
a new value of not less than $25,000,000 as of the date of investment by the insurer;
and (3) An exchange
traded fund that is registered with the federal Securities and Exchange Commission
under the Investment Company Act of 1940, as amended, and is traded on a public
(b) In aggregate,
an insurer's amount of investment] (a) To meet the requirements
under section 431:6-201, an insurer may invest in common trust funds, mutual
funds, and exchange traded funds, provided that an insurer's amount of investment
made pursuant to this section and in common stocks [ including investments]
made pursuant to section 431:6-317(a)[ ,] shall not exceed the greater of
twenty-five per cent of its admitted assets or one hundred per cent of its surplus
as regards to policyholders as defined in section 431:6-101. This limitation shall
not apply to investments approved on the "Mutual Funds List" from the
Purposes and Procedures Manual of the SVO, or its successor publication.
An insurer may invest any of its funds in common trust funds, mutual funds, and
exchange traded funds after satisfying the requirements of section 431:6-201.
(c) For purposes of this section:
"Common trust funds" means a fund maintained by a bank exclusively for the collective investment and reinvestment of moneys contributed by the bank in its capacity as a trustee, executor, administrator, guardian, or custodian of accounts as defined in Section 584 of the United States Internal Revenue Code of 1986, as amended.
"Exchange traded fund" means a security that tracks an index, commodity, or basket of assets similar to an index fund, is registered with the federal Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and is traded on a public exchange.
"Mutual funds" means an investment company that is registered with the federal Securities and Exchange Commission under the Investment Company Act of 1940 (15 United States Code Section 80a-1, et seq.), as amended."
SECTION 6. Section 431:7-206, Hawaii Revised Statutes, is amended to read as follows:
Domestic company credit for retaliatory taxes paid other states. If by the
laws of any state other than this State, or by the action of any public official
of another state, any insurer or company, as defined in section 431:1-202, organized
or domiciled in this [
State,] state, shall be required to pay taxes
for the privilege of doing business in the other state, and the amounts are imposed
or assessed so that the taxes which are or would be imposed against Hawaii domestic
insurance companies are greater than those taxes required of insurers organized
or domiciled in the other state, to the extent the amounts are legally due to the
other states, an insurer or company organized or domiciled in this [ State]
state may claim a credit against the tax payable pursuant to this article
of a sum not to exceed one hundred per cent of the amount. The credit shall not
be greater than the tax payable pursuant to this article during the taxable year.
All claims for the tax credit under this section,
including any amended claims, shall be filed on or before the end of the twelfth
month following the close of the taxable year for which the credit may be claimed.
Failure to comply with the foregoing provision shall constitute a waiver of the
right to claim the credit."
SECTION 7. Section 431:8-310, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The commissioner shall issue a surplus lines broker license to any producer licensed under article 9A, except producers licensed under section 431:9A-107(a)(1), (2), or (5), when the producer has:
(1) Remitted the annual license fee to the commissioner as provided in article 7; and
(2) Submitted a completed license application on a form furnished by the commissioner."
SECTION 8. Section 431:9-222.5, Hawaii Revised Statutes, is amended to read as follows:
claims] Claims adjusters; limited license. (a) The
commissioner may issue a limited license to an adjuster who only adjusts either
workers' compensation or crop insurance claims; provided that the
(1) Is domiciled in the State of Hawaii, or in a state that permits residents of the State of Hawaii to act as adjusters in that other state;
(2) Has had experience, special education, or training in handling loss claims under workers' compensation or crop insurance contracts of sufficiently reasonable duration and extent to enable an individual to fulfill the responsibilities of an adjuster;
(3) Has a passing grade on the workers' compensation or crop insurance examination pursuant to section 431:9-206; and
(4) Pays the applicable fees.
(b) An adjuster with a limited license in workers' compensation issued under this section may extend the license biennially upon successfully passing a reexamination on workers' compensation."
SECTION 9. Section 431:9A-124, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) The required number of credit hours shall be as follows:
(1) For a licensee authorized to sell lines of insurance in only one of the following groups:
(A) Life or accident and health or sickness; or
(B) Property, marine and transportation, vehicle, general casualty, or surety;
the requisite number of credit hours shall
twenty] twenty-four credit hours, consisting of twenty-one
credit hours relating to the line of authority for which the license is
held[ , including] and three credit hours relating to ethics
training or relating to the insurance laws and the insurance rules;
(2) For a licensee with a license to sell lines of
insurance in both groups in paragraph (1), the total requisite number of credit
hours shall be [
thirty] twenty-four credit hours, [ of which:]
Twelve] Ten credit hours [ shall
relate] relating to paragraph (1)(A) [ of which two hours shall
relate to the insurance laws and the rules relating to the line of authority for
which the license is held; and];
Eighteen] Eleven credit
hours [ shall relate] relating to paragraph (1)(B) [ of which
two hours shall relate to the insurance laws and the rules relating to the line
of authority for which the license is held.]; and
(C) Three credit hours relating to ethics training or relating to the insurance laws and the insurance rules.
For purposes of this section, ethics training shall include but shall not be limited to the study of fiduciary responsibility, commingling of funds, payment and acceptance of commissions, unfair claims practices, policy replacement considerations, and conflicts of interest."
SECTION 10. Section 431:14-104, Hawaii Revised Statutes, is amended to read as follows:
"§431:14-104 Rate filings. (a) Every insurer shall file with the commissioner every manual of classifications, rules, and rates, every rating plan, every other rating rule, and every modification of any of the foregoing that it proposes to use; provided that filings with regard to specific inland marine risks, which by general custom of the business are not written according to manual rate or rating plans, and bail bonds, subject to section 804-62, shall not be required pursuant to this subsection.
Every filing shall:
(1) Consist of two printed copies and one
copy filed by electronic, telephonic, or optical means; (2)] (1) State its proposed effective
(3)] (2) Indicate the character and
extent of the coverage contemplated; [ and]
(4)] (3) Include a report on investment
income[ .]; and
(4) Be accompanied by a $50 fee payable to the commissioner, which fee shall be deposited in the commissioner's education and training fund.
(b) Each filing shall be accompanied by a
$50 fee payable to the commissioner, which fee shall be deposited in the
commissioner's education and training fund.]
(b) An insurer shall submit to the commissioner:
(1) An electronic version of the filing. The commissioner may request a printed version of the electronic filing to be also submitted; or
(2) Two printed versions of the filing.
(c) At the same time as the filing of the rate, every insurer shall file all supplementary rating and supporting information to be used in support of or in conjunction with a rate. The insurer may satisfy its obligation to file supplementary rating and supporting information by reference to material which has been approved by the commissioner. The information furnished in support of a filing may include or consist of a reference to:
(1) The prospective loss cost filing made by a rating organization or an advisory organization and approved by the commissioner;
(2) The experience or judgment of the insurer or information filed by the rating organization or advisory organization on behalf of the insurer as permitted by section 431:14-104.5;
(3) Its interpretation of any statistical data upon which it relies;
(4) The experience of other insurers, rating organizations, or advisory organizations; or
(5) Any other relevant factors.
(d) When a filing is not accompanied by the information upon which the insurer supports the filing, and the commissioner does not have sufficient information to determine whether the filing meets the requirements of this article, the commissioner shall require the insurer to furnish additional information and, in that event, the waiting period shall commence as of the date the information is furnished. Until the requested information is provided, the filing shall not be deemed complete or filed nor available for use by the insurer. If the requested information is not provided within a reasonable time period, the filing may be returned to the insurer as not filed and not available for use.
(e) Except for rates filed in accordance with subsections (k), (l), and (m), a filing and any supporting information shall be open to public inspection upon filing with the commissioner.
(f) Specific inland marine rates on risks specially rated, made by a rating organization, shall be filed with the commissioner.
(g) An insurer may satisfy its obligation to make the filings by becoming a member of, or a subscriber to, a licensed rating organization which makes the filings except for those lines of insurance for which the commissioner determines individual insurer rate filings shall be made. Nothing contained in this article shall be construed as requiring any insurer to become a member of or a subscriber to any rating organization.
(h) After reviewing an insurer's filing, the commissioner may require that the insurer's rates be based upon the insurer's own loss and expense information. If the insurer's loss or allocated loss adjustment expense information is not actuarially credible, as determined by the commissioner, the insurer may use or supplement its experience with information filed with the commissioner by a rating organization or advisory organization. At the commissioner's request, each insurer utilizing the services of a rating organization or advisory organization must submit with its rate filing, a description of the rationale for that use, including the insurer's own information and method of utilizing the rating or advisory organization's information.
(i) The commissioner shall review filings as soon as reasonably possible after they have been made to determine whether they meet the requirements of this article. The commissioner shall calculate the investment income and accuracy of loss reserves upon which filings are based, and the insurer shall provide the information necessary to make the calculation.
(j) Except as provided herein and in subsections (k) and (l) and section 431:14-120, each filing shall be on file for a waiting period of thirty days before the filing becomes effective. The period may be extended by the commissioner for an additional period not to exceed fifteen days if the commissioner gives written notice within the waiting period to the insurer, rating organization, or advisory organization that made the filing that the commissioner needs the additional time for the consideration of the filing. Upon the written application by the insurer, rating organization, or advisory organization, the commissioner may authorize a filing which the commissioner has reviewed to become effective before the expiration of the waiting period or any extension thereof. A filing shall be deemed to meet the requirements of this article unless disapproved by the commissioner within the waiting period or any extension thereof.
(k) The following rates shall become effective when filed:
(1) Specific inland marine rates on risks specially rated by a rating organization;
(2) Any special filing with respect to a surety or guaranty bond required by law or by court or executive order or by order or rule of a public body, not covered by a previous filing; and
(3) Any special filing with respect to any class of insurance, subdivision, or combination thereof which is subject to individual risk premium modification and has been agreed to by an insured under a formal or informal bid process.
The rates shall be deemed to meet the requirements of this article until the time the commissioner reviews the filing and so long as the filing remains in effect.
(l) The commissioner, by written order, may suspend or modify the requirement of filing as to any class of insurance, subdivision, or combination thereof, or as to classes of risks, the rates for which cannot practicably be filed before they are used. The orders shall be made known to the affected insurers and rating organizations. The commissioner may make examinations as the commissioner may deem advisable to ascertain whether any rates affected by the order meet the standards set forth in section 431:14-103(a)(1).
(m) The commissioner may approve a rate on any specific risk in excess of that set by an applicable rate filing, provided the insured files with the commissioner a written application stating the insured's reasons for consenting to the excess rate. Upon approval by the commissioner, the rate shall be deemed effective retroactive to the date of the insured's application.
(n) No insurer shall make or issue a contract or policy except in accordance with filings which are in effect for the insurer as provided in this article or in accordance with subsections (k), (l), or (m). This subsection shall not apply to contracts or policies for inland marine risks as to which filings are not required."
SECTION 11. Section 431:14-105, Hawaii Revised Statutes, is amended to read as follows:
"§431:14-105 Policy revisions that
alter coverage. (a) Any policy revisions that alter coverage in
any manner shall be filed with the commissioner[
, consist of two printed
copies and one copy by electronic, telephonic, or optical means,] and
include an analysis of the impact of each revision on rates.
(b) A filing shall consist of either:
(1) An electronic version of the filing. The commissioner may request a printed version of the electronic filing to be also submitted; or
(2) Two printed versions of the filing.
(c) After review by the commissioner, the commissioner shall determine whether a rate filing for the policy revision must be submitted in accordance with section 431:14-104."
SECTION 12. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 13. This Act shall take effect on July 1, 2009, provided that section 3 shall take effect on January 1, 2010.