Bill Text: HI SB2732 | 2016 | Regular Session | Amended
Bill Title: Hawaii Hurricane Relief Fund; Interest Earned, Study; Appropriation ($)
Spectrum: Partisan Bill (Democrat 15-0)
Status: (Engrossed - Dead) 2016-03-24 - Passed Second Reading as amended in HD 1 and referred to the committee(s) on FIN with none voting aye with reservations; none voting no (0) and Representative(s) Kawakami, Kong, Oshiro, Tokioka, Tupola, Woodson excused (6). [SB2732 Detail]
Download: Hawaii-2016-SB2732-Amended.html
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THE SENATE |
S.B. NO. |
2732 |
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TWENTY-EIGHTH LEGISLATURE, 2016 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO THE HAWAII HURRICANE RELIEF FUND.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The purpose of this Act is to address the Hawaii hurricane relief fund.
More specifically, this Act:
(1) Provides for the interest earned on the balance of the hurricane reserve trust fund to be retained in the hurricane reserve trust fund; and
(2) Requires the board of directors of the Hawaii hurricane relief fund to conduct a study to determine whether the use of parametric disaster insurance policies for the State is feasible, practical, affordable, and in the public interest.
Prior to this Act, the interest earned on the balance of the hurricane reserve trust fund was transferred to the general fund. The transfer was implemented in 2002 to address the state budgetary shortfall caused by the "9/11" terrorist attack on the United States. The transfer to the general fund proved even more useful to mitigate the revenue shortfalls during the years of the Great Recession.
Now that the economy of Hawaii has improved and general fund revenues from tax sources have and are projected to increase at fairly healthy annual rates, the legislature finds that the general fund no longer needs the interest transferred from the hurricane reserve trust fund.
The hurricane reserve trust fund serves as a de facto budget reserve for the State, although that was not its original purpose. The legislature finds that the fund should continue to serve in that capacity, augmented by the compounding of all or some of the annual interest earned on the principal.
The legislature further finds that hurricanes are constant seasonal threats to the Hawaiian Islands. A record of fifteen tropical cyclones entered the Central Pacific during the June 1 to November 30, 2015, hurricane season. Fortunately, none of them directly hit the main Hawaiian Islands.
The legislature finds that Hawaii is highly exposed to natural disasters, yet there is a gap between the State's exposure to disasters and its investment in post-disaster financing. Currently, Hawaii relies on federal funding from the Federal Emergency Management Agency and the National Flood Insurance Program to support disaster recovery. Limited federal disaster assistance creates a liquidity gap that deepens the economic disruption for Hawaii's economy.
The legislature further finds that total losses from a storm making landfall near Waikiki with the same strength as Hurricane Iniki could cost twenty to forty billion dollars in direct economic losses, which represents almost fifty per cent of the state gross domestic product and over three years of total government spending. If a catastrophic event occurs, the federal government does not have the authority to go beyond providing financial assistance to rebuild public facilities, small temporary housing allowances to families left homeless, and Small Business Administration loans to rebuild homes and businesses. Although some property losses will be covered by personal insurance, the vast majority of losses will fall on the State and counties, and thus, the taxpayers. The State is not prepared to absorb tens of billions of dollars in damages and lost tax revenue. However, a parametric insurance transfer could move residual risk off the State's budget and onto the private sector.
Parametric, or index-based, insurance solutions settle claims on the characteristics of a disaster, as opposed to the loss sustained from the disaster. Unlike traditional insurance, parametric solutions do not require lengthy loss adjustment processes and they enable rapid disbursements of payouts to maximize liquidity and allow for flexibility in the use of the proceeds. Payouts can occur quickly, in as few as ten to twenty-one days. The trigger for a parametric insurance cover in Hawaii for a natural disaster could be based on the maximum wind speed of the hurricane as it passes through a specific covered area such as the Ala Wai watershed. An example of a specific trigger would be that any hurricane with one-minute maximum winds of ninety-six miles per hour or higher as it passes through a designated area would result in a payout.
For this purpose, the legislature finds that the board of directors of the Hawaii hurricane relief fund should conduct a study to determine whether the use of parametric disaster insurance policies for the State is feasible, practical, affordable, and in the public interest.
SECTION 2. Section 431P-16, Hawaii Revised Statutes, is amended to read as follows:
"§431P-16 Establishment of trust funds. (a) The fund shall establish outside the state treasury a hurricane reserve trust 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 hurricane reserve trust 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) The hurricane reserve trust fund shall receive deposits of the special mortgage recording fee established by this chapter. Except as determined by board order, the special mortgage recording fee shall be imposed on each mortgage and each amendment to a mortgage which, in each case, increases the principal amount of the secured debt and which is recorded in the bureau of conveyances of the State under chapter 502 or filed with the assistant registrar of the land court of the State under chapter 501.
The special mortgage recording fee shall be an amount equal to one-tenth of one per cent of the stated principal amount of the debt secured by the mortgage or, in the case of an amendment or refinancing of a mortgage, an amount equal to one-tenth of one per cent of the amount of the increase of the stated principal amount of the secured debt; provided that the board may establish a lower special mortgage recording fee amount pursuant to section 431P-5(b)(14). With respect to an open end revolving loan, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the maximum amount which may be outstanding under the loan at any one time. With respect to a mortgage securing a nonmonetary or inchoate obligation, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the monetary amount which the mortgagee attributes to the obligation. If the debt is stated in a foreign currency, it shall be converted to U.S. dollars using an exchange rate published in a newspaper of general circulation in this State within one week prior to recordation of the mortgage or amendment of mortgage.
The special mortgage recording fee shall be in addition to any applicable fees under chapter 501 or 502. The special mortgage recording fee shall be submitted to and collected by the bureau of conveyances or the assistant registrar of the land court of the State and shall be deposited into the hurricane reserve trust fund. The special mortgage recording fee shall be submitted at the time the mortgage or amendment of mortgage is recorded together with any related forms or certifications required by the bureau of conveyances or the assistant registrar of the land court of the State.
(c) The Hawaii hurricane relief fund shall implement the assessments of all property and casualty insurers as authorized by section 431P-5(b)(8)(A) and (B) and the proceeds from the assessments shall be deposited into the hurricane reserve trust fund or into trust or custodial accounts, created for the benefit of the fund's secured parties, that are held inside or outside the hurricane reserve trust fund.
(d) If the Hawaii hurricane relief fund offers to issue policies of hurricane property insurance, the premiums for the policies shall be deposited into the hurricane reserve trust fund.
(e) After each covered event, if the board determines that the moneys in the hurricane reserve trust fund, excluding moneys determined by the board to be needed to continue fund operations following the covered event, will be insufficient to pay claims and other obligations of the fund arising out of that covered event, the Hawaii hurricane relief fund shall levy a surcharge not to exceed seven and one-half per cent a year on premiums charged for all property and casualty insurance policies issued for risks insured in this State. These moneys may be deposited into the hurricane reserve trust fund or into trust or custodial accounts created for the benefit of the fund's secured parties that are held inside or outside the hurricane reserve trust fund. The surcharge shall remain in effect until all claims and other obligations of the fund, including but not limited to claims under fund policies of hurricane property insurance, claims financing transactions, bonds, notes, and other obligations arising out of that covered event have been fully discharged. The amount and reason for any surcharge made pursuant to this subsection shall be separately stated on any billing sent to an insured. The surcharge shall not be considered premiums for any other purpose including the computation of gross premium tax or the determination of producers' commissions. The fund may establish procedures for insurers to collect the surcharge from customers who hold property or casualty policies.
(f) Any proceeds, experience refunds, or other return funds under reinsurance shall be deposited into the hurricane reserve trust fund.
(g) Any proceeds from loans or other moneys from the federal government, any proceeds from bonds issued pursuant to this chapter loaned by the director to the Hawaii hurricane relief fund, and other moneys as the State may make available from time to time shall be deposited into the hurricane reserve trust fund.
(h) Any interest earned on the balance of the hurricane reserve trust fund shall be retained in the hurricane reserve trust fund.
[(h)] (i) Moneys in the
hurricane reserve trust fund or in trust or custodial accounts, created for the
benefit of the fund's secured parties, shall be expended by the Hawaii
hurricane relief fund or its authorized designee and used solely for the
purposes of this chapter.
[(i)] (j) Moneys in the
hurricane reserve trust fund may be disbursed upon dissolution of the Hawaii
hurricane relief fund; provided that:
(1) The net moneys in the hurricane reserve trust fund shall revert to the state general fund after payments by the fund on behalf of licensed property and casualty insurers or the State that are required to be made pursuant to any federal disaster insurance program enacted to provide insurance or reinsurance for hurricane risks are completed; and
(2) If such moneys are paid on behalf of licensed
property and casualty insurers, payment shall be made in proportion to the
premiums from policies of hurricane property insurance serviced by the insurers
in the twelve months prior to dissolution of the fund[;
provided that all interest earned from the
principal in the hurricane reserve trust fund shall be transferred and
deposited into the general fund each year that the hurricane reserve trust fund
remains in existence]."
SECTION 3. (a) The board of directors of the Hawaii hurricane relief fund shall conduct a study to determine whether the use of parametric disaster insurance policies for the State is feasible, practical, affordable, and in the public interest.
(b) The board of directors shall submit the study, with findings, recommendations, and any proposed legislation, to the legislature and governor at least twenty days before the convening of the regular session of 2017.
SECTION 4. (a) There is appropriated out of the hurricane reserve trust fund of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2016-2017 to conduct the study on whether the use of parametric disaster insurance policies for the State is feasible, practical, affordable, and in the public interest as required under section 3.
The sum appropriated shall be expended by the board of directors of the Hawaii hurricane relief fund for the purposes of this Act.
(b) Notwithstanding any law to the contrary, the board of directors of the Hawaii hurricane relief fund may expend the appropriation under this section for the specified purpose.
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect on July 1, 2016.
Report Title:
Hawaii Hurricane Relief Fund; Interest Earned, Study; Appropriation
Description:
Requires the interest earned on the balance of the Hurricane Reserve Trust Fund to be retained in the Hurricane Reserve Trust Fund. Requires the Board of Directors of the Hawaii Hurricane Relief Fund to conduct a study on whether the use of parametric disaster insurance policies for the State is feasible, practical, affordable, and in the public interest. Appropriates Hurricane Reserve Trust Fund moneys for the study. (SB2732 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
