Hawaii's progress as a captive domicile changed gear during 1999. Eleven new captives were licensed, bringing the year end total to 64, net of cancellations. Furthermore, eight new licences were in the application process. The state of Hawaii hired three full time staff to administer a new captive insurance branch of the insurance division, headed by long time captive manager Craig Watanabe, and passed new legislation designed to clarify and simplify the law for the insurer, prospective insurer and regulators.
Confirming the growth of interest in Hawaii as a domicile, there was a 40% increase in the attendance at Hawaii Captive Insurance Council's forum in October, compared to 1998, bringing the total number to 250. A one day international captive briefing in Japan in September 1999, at which the Governor of Hawaii Benjamin Cayetano spoke along with state officials and members of the Hawaii Captive Insurance Council, attracted 240 business people- twice the number expected.
The Hawaii Captive Insurance Council (HCIC) attributes the increased interest to:
• long effort and co-operation between the private and public sectorsin Hawaii • Twelve years of hard work by the insurance department in dealing with captives
• Twelve years development of the expertise of private sector service providers
• The presence in Hawaii of essential infrastructure, such as major firms of accountants, and experienced investment and banking facilities
• Ease of access to Honolulu from major US and international airports
• Attractions of Hawaii itself - scenery, hotels and food.
Amendments to the state's captive insurance statutes signed by Governor Cayetano during 1999 created four classes of captive:
Class 1: pure captive writing only as a reinsurer
Class 2: pure captive writing insurance or reinsurance
Class 3: association or risk retention captive
Class 4: leased capital facility (rent-a-captive).
The leased capital facility is defined as a limited membership insurance company that insures the risks of its members but whose owners may be persons or entities other than the members, subject to the approval of the insurance commissioner.
In addition, minimum capital/surplus requirements for stock and non-stock captives were established. These are $100,000 for a class 1 company; $250,000 for class 2 companies; $500,000 for class 3 and $1 million for class 4.
Further legislation during 2000 will include increasing confidentiality provisions and other requirements to meet the needs of US and foreign captive owners. Hawaii also intends to implement measures to make it easier for captives from Japan to organise and operate Hawaii captives. The HCIC has long seen Hawaii as a natural home for Japanese captives and believes that interest will grow with the deregulation of the Japanese insurance market this year.
The head of Hawaii's new insurance division captive unit, Craig Watanabe, has been instrumental in the development of the state's captive insurance industry since he formed the first Hawaii-based captive insurance management office. He was most recently a senior vice president of 50th State Risk Management Services, part of the American International Group, and director of captive operations for AIG Insurance Management Services in Hawaii. He served as the chairman and director of the Hawaii Captive Insurance Council of which he is a founding member.
Mr Watanabe explains that previously the administration and regulation of captives was handled by a captive insurance task force comprised of the insurance commissioner and insurance specialist, Gordon Nishiki, plus other key insurance division staff. They oversaw the examinations, rate and form filings, financial surveillance, and actuarial reviews, but only as needed since they also had other duties within the insurance division. Now with the new branch, there will be three full time captive insurance staff fulfilling these functions.
For the future, Mr Watanabe states: “We are looking at prudent developmentof the captive industry in Hawaii. Some of our activities will include refining legislation and administrative rules as well as the application and approval process to facilitate the formation of these companies.”
Perhaps Hawaii's history will be a blueprint for new domiciles, giving an indication of how to build momentum and how long it takes.