Hawaii Commissioner's Memorandum 2008-4E

LINDA LINGLE GOVERNOR JAMES R. AIONA. JR. LT. GOVERNOR TO: FROM: RE: STATE OF HAWAl'I INSURANCE DIVISION DEPARTMENT OF COMMERCE & CONSUMER AFFAIRS P. 0. BOX 3614 HONOLULU, HAWAl'I 96811-3614 335 MERCHANT STREET, ROOM 213 HONOLULU, HAWArl Q6613 PHONE NO: (808) 5fl6..2700 FAX NO: (808) MB-2606 www.hawali.Q(lvldCCA/ins September 8, 2008 LAWRENCE M. REIFURTH DIRECTOR J.P. SCHMIDT INSURANCE COMMISSIONER MEMORANDUM 2008-4E Hawaii Domiciled Insurance Companies J.P. Schmidt Insurance Commissioner Act 142, 2008 Session Laws of Hawaii - Insurer Investments The 2008 Legislature passed Act 142, Session Laws ofHawaii 2008, or Senate Bill No. 3019, S.D. 1, H.D. 2 ("Act 142"), an Administration bill that updates insurer investment statutes in Article 6 of the Insurance Code, Hawaii Revised Statutes ("HRS") Chapter 431. Effective January 1, 2009, Act 142 clarifies allowable investments and provides increased flexibility for insurers to pursue greater investment return opportunites for the benefit of insurers and policyholders. Significant changes in Act 142 include the following: • HRS§ 431:6-101 Definitions: Includes definitions of"cash" and "cash equivalents" based upon the National Association of Insurance Commissioners' ("NAlC") standard, which are defined as highly-liquid investments or securities in the highest short-term category recognized by the NAlC's Securities Valuation Office ("SVO"). • HRS§ 431:6-104 General qualifications: Allows for non-dividend paying securities up to certain limitations. • HRS§ 431:6-201 Required investments for capital and reserves: Clarifies and adds certain additional assets that are allowed in meeting an insurer's reserve requirements. Commissioner's Memorandum 2008-4E September 8, 2008 Page2 of2 • HRS§ 431:6-301 Corporate obligations HRS§ 431:6-303 Preferred or guaranteed stocks or shares: These sections are simplified by replacing the "fixed charges" requirements with a general requirement of being considered "filing exempt" by the NAIC's SVO. • HRS§ 431:6-313 Foreign securities: With certain limitations, this section is expanded to allow foreign investments (including American Depository Receipts) in jurisdictions other than those currently allowed. • HRS§ 431:6-317 Common stocks: With certain limitations, common stocks (including non-dividend paying stocks) are allowed for purposes of satisfying requirements of HRS § 431 :6-201. In addition, the requirements of a qualifying common stock investment are clarified. • HRS §431:6-311 Common trust funds, mutual funds: With certain limitations, this section is expanded to include exchange traded funds registered with the federal Securities and Exchange Commission. Limitations do not apply to investments on the "Mutual Funds List" approved by the NAIC's SVO. Act 142 maybe viewed in full at http://www.capitol.hawaii.gov/session2008/bills/GM784_.pdf If there are any questions relating to Act 142, please call the Hawaii Insurance Division's Financial Surveillance and Examination Branch at (808) 586-3870.