Bill Text: HI SB325 | 2024 | Regular Session | Introduced

Hawaii Senate Bill 325

Introduced

Bill Title: Relating To Insurance.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2023-12-11 - Carried over to 2024 Regular Session. [SB325 Detail]

Download: Hawaii-2024-SB325-Introduced.html

THE SENATE	S.B. NO.	325
THIRTY-SECOND LEGISLATURE, 2023
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 431:19-101, Hawaii Revised Statutes, is amended as follows:

1. By amending the definitions of "participant contract" and "protected cell" to read:

""Participant contract" means a contract by which a sponsored captive insurance company, on behalf of a participant, insures the risks of a participant and may also limit the losses of each participant to its pro rata share of the assets of one or more protected cells identified in [~~such~~] the participant contract.

"Protected cell" means a separate account established by a sponsored captive insurance company formed or licensed under this article in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts to fund the liability assumed on behalf of the participants by [of] the sponsored captive insurance company [~~assumed on behalf of the participants~~] as set forth in the participant contracts."

2. By amending the definition of "sponsored captive insurance company" to read:

""Sponsored captive insurance company" means a captive insurance company:

(1) In which the minimum required capital and surplus is provided by one or more sponsors;

(2) That is formed or licensed under this article;

(3) [~~That insures the risks only of its participants through separate participant contracts;~~] In which risks assumed on behalf of the participant pursuant to separate participant contracts are maintained in separate protected cells for each participant; and

(4) That may fund [~~its~~] the liability [to] of each participant through one or more protected cells. A sponsored captive insurance company segregates the assets of each protected cell from the assets of other protected cells and from the assets of the sponsored captive insurance company's general account."

SECTION 2. Section 431:19-108, Hawaii Revised Statutes, is amended to read as follows:

"§431:19-108 Examinations, investigations, and financial surveillance[.]; certificate of exemption. (a) The commissioner or any authorized examiner may conduct an examination, investigation, or financial surveillance of any captive insurance company as often as the commissioner deems appropriate; provided that, unless exempt or the commissioner requires otherwise:

(1) An examination shall be conducted at least once every five years for all captive insurance companies, except as provided in paragraph (2); and

(2) An examination of a risk retention captive insurance company shall be conducted no later than three years after its formation and at least once every five years thereafter.

The commissioner or any authorized examiner shall thoroughly inspect and examine the captive insurance company's affairs to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with this article.

(b) The powers, authorities, and duties relating to examinations vested in and imposed upon the commissioner under section 431:2-301 through section 431:2-307.5 of the code are extended to and imposed upon the commissioner in respect to examinations of captive insurance companies.

(c) All examination reports, preliminary examination reports or results, working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the commissioner or any person in the course of an examination made under this section are confidential and are not subject to subpoena and may not be made public by the commissioner or an employee or agent of the commissioner without the written consent of the company, except to the extent provided in this subsection. Nothing in this subsection shall prevent the commissioner from using information in furtherance of the commissioner's regulatory authority under this title. The commissioner may grant access to the information to public officers having jurisdiction over the regulation of insurance in any other state or country, or to law enforcement officers of this State or any other state or agency of the federal government at any time, so long as the officers receiving the information agree in writing to hold it in a manner consistent with this section.

(d) Each branch captive insurance company shall file annually with the commissioner a certificate of compliance issued by the insurance regulatory authority of the jurisdiction in which the outside captive insurance company of the branch captive insurance company is domiciled along with certified copies of any examination reports conducted of the outside captive insurance company by its domiciliary insurance regulator during the preceding calendar year. These filings shall be made with the commissioner by March 1 of each year. So long as the branch captive insurance company complies with the requirements of this subsection, and unless otherwise deemed necessary by the commissioner, any examination of the branch captive insurance company under this subsection shall be only with respect to the business underwritten by the branch captive insurance company in this State. If necessary, however, the commissioner may examine the outside captive insurance company of any branch captive insurance company licensed under this article.

(e) Except for risk retention captive insurance companies, captive insurance companies may apply to the commissioner for a certificate of exemption from examination; provided that the captive insurance company applicant has:

(1) Satisfactorily completed at least one examination under this section;

(2) Continuously filed and continues to file all financial statements and other reports and otherwise complies with all other required provisions of this article; and

(3) Demonstrated other good cause supporting the application for certificate of exemption from further examination.

(f) If the commissioner is satisfied with the captive insurance company's application, the commissioner may issue a certificate of exemption from examination along with renewals thereof.

(g) Unless earlier revoked by the commissioner for good cause, a certificate of exemption from examination shall be valid for a period not to exceed five years from its effective date, and a captive insurance company may apply to the commissioner for renewal of its certificate of exemption from examination no earlier than six months prior to its expiration date."

SECTION 3. Section 431:19-303, Hawaii Revised Statutes, is amended to read as follows:

"§431:19-303 Protected cells. A sponsored captive insurance company formed and licensed under this article may, subject to the commissioner's approval, establish and maintain one or more protected cells to insure risks of one or more participants, or other parties unaffiliated with a participant, or both, subject to the following:

(1) The shareholders or members of a sponsored captive insurance company shall be limited to its participants and sponsors; provided that a sponsored captive insurance company may issue nonvoting securities to other persons on terms approved by the commissioner;

(2) A protected cell shall be organized and operated in only those forms of business organization authorized by the commissioner, including an association, corporation, limited liability company, partnership, or trust;

(3) Each protected cell shall be accounted for separately on the books and records of the sponsored captive insurance company to reflect the financial condition and results of operations of the protected cell, net income or loss, dividends or other distributions to participants, and other factors as may be provided in the participant contract or required by the commissioner;

(4) The assets of a protected cell shall not be chargeable with liabilities arising out of any other insurance business the sponsored captive insurance company may conduct;

(5) No sale, exchange, or other transfer of assets may be made by a sponsored captive insurance company between or among any of its protected cells without the consent of the protected cells;

(6) No sale, exchange, transfer of assets, dividend, or distribution may be made from a protected cell to a sponsor or participant without the commissioner's approval, and in no event shall the approval be given if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to a protected cell;

(7) Each sponsored captive insurance company shall annually file with the commissioner, financial reports as the commissioner shall require, that shall include, without limitation, accounting statements detailing the financial experience of each protected cell;

(8) Each sponsored captive insurance company shall notify the commissioner in writing within ten business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations; and

(9) No participant contract shall take effect without the commissioner's prior written approval, and the addition of each new protected cell and withdrawal of any participant or termination of any existing protected cell shall constitute a change in business plan requiring the commissioner's prior written approval."

SECTION 4. Section 431:19-305, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) A participant shall insure only [~~its own~~] risks approved by the commissioner through a sponsored captive insurance company."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

Report Title:

Insurance; Captive Insurance; Examination Exemption; Insurance Commissioner; Participants; Protected Cells

Description:

Requires sponsored captive insurance companies to maintain separate protected cells for separate participant contracts. Except for risk retention captive insurance companies, authorizes captive insurance companies to apply for a certificate of exemption from examination from the Insurance Commissioner, provided certain conditions are met. Requires protected cells established by sponsored captive insurance companies to be approved by the Insurance Commissioner. Authorizes sponsored captive insurance companies to establish and maintain protected cells to insure risks of parties unaffiliated with a participant under certain circumstances. Requires a participant, through a sponsored captive insurance company, to insure only risks approved by the Insurance Commissioner.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.