Senate committee defers captive‑insurance exam exemption bill after split testimony

The Hawaii Senate Committee on Commerce and Consumer Protection on Feb. 14 deferred decision making on SB 1050, a bill that would let non‑risk‑retention captive insurance companies apply to the insurance commissioner for exemptions from on‑site examinations after meeting specified requirements.

Proponents argued the bill would reduce duplicative oversight for financially sound captives and improve Hawaii’s competitiveness as a domicile. Paul Shimamoto, president of the Hawaii Captive Insurance Council, said the proposal “acknowledges and rewards certain gold standard companies” and would allow regulators to focus resources on higher‑risk entities. Shimamoto told senators that the council represents nearly 300 active captives and estimated the sector contributes about $120 million a year to the state economy. “By allowing gold standard companies to apply for exemption from exams, Hawaii will distinguish itself in the global captive insurance market,” he said.

Regulators warned that the bill, as drafted, gives the commissioner broad discretion without clear criteria for who qualifies and could create gaps in oversight. Jerry Bump, acting insurance commissioner, said the division already relies on mandatory annual filings and that examinations often reveal business‑plan changes and unreported activities that filings alone do not show. “We don’t know if there’s things that they’re not reporting to us, and that’s where when we go in and do the examination on a 5‑year period, that’s where we can identify...findings,” Bump said.

Committee members pressed both sides on middle‑ground options. Senators asked whether limiting exemptions to captives that submit audited financial statements or shortening the exemption period from five years to three years would address oversight concerns; industry representatives said the current five‑year exam cycle is standard in many domiciles and argued that annual filings and business‑plan approvals preserve regulator visibility.

The committee deferred SB 1050 to Feb. 21, 2025 to allow further negotiation between the Hawaii Captive Insurance Council and the insurance division over eligibility criteria, filing requirements and any conditions that would allow the commissioner to intercede if a captive’s condition deteriorates.

Clarifying figures provided during testimony: Shimamoto said Hawaii hosts about 300 actively licensed captive companies; the industry estimates gross written premiums nationally for Hawaii captives at about $17 billion to $20 billion and reported that 46 licensed captives have Japanese parent companies and that licensees have invested roughly $2 billion in Hawaii financial institutions.

Next steps: The committee scheduled the bill for decision making on Feb. 21 to consider amendments on qualification criteria and oversight safeguards.