Hawaii Gov. Linda Lingle has signed SB3023 SD2 HD2 CD1 (Act 190) into law, amending the state’s captive insurance industry statutes.
According to the Hawaii Department of Commerce and Consumer Affairs Insurance Division, which initiated the legislation, the new law amends the Captive Insurance Industry statutes “to provide a clear and efficient process for securitization of insurance products.” Securitization is a process where certain insurance risks are packaged, and then shares are sold as investments. Large investors are interested in this type of investment because it is uncorrelated to other financial market investments, which provides a much desired diversification of the investment portfolio, the DOI indicated.
Hundreds of millions of dollars in excess reserves or embedded value of an insurance company may be securitized and sold as investments. In addition, catastrophic risk, such as Japan or California earthquakes and Pacific or Atlantic Coast hurricane risks, may be placed in a multi-billion dollar package and transferred to the financial markets. Local banks, professionals and consultants
benefit by providing support to these multi-billion dollar transactions, DOI explained.
“Our Captive Branch has handled these complex deals in the past and our staff and professionals in the community have the expertise to ensure that securitizations are closed expeditiously and efficiently,” said Hawaii Insurance Commissioner J.P. Schmidt.
Schmidt recently returned from New York City, where he met with investment banks and law firms involved in securitizations. While there, he was asked to speak to the insurance section of the International Committee of the New York Bar about current issues in insurance. Schmidt and Deputy Commissioner Craig Watanabe have been asked to speak about captive insurance issues at the Asia-
Pacific Rendezvous in Singapore in July 2008.
Hawaii is an ideal location in the Pacific for captive insurance business, and is the second largest in the United States, and the fifth largest domicile in the world — based on the combined capital assets of the captive companies, the DOI said.
For more information, visit www.captiveinsurance.hawaii.gov.
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