Hawaii Updates Captive Insurance Examination Law

Hawaii Governor Josh Green has signed Senate Bill 2043 into law as Act 255, updating the state's captive insurance examination framework with a more risk-based regulatory approach.

Under Act 255, most captive insurers will continue to receive an initial financial examination within 5 years of licensure. After that, through December 31, 2031, the insurance commissioner will have discretion to determine whether additional examinations are necessary based on each captive's risk profile and other regulatory considerations. Beginning January 1, 2032, the statutory 5-year examination cycle will resume unless lawmakers extend or modify the framework. The legislation does not change examination requirements for risk retention groups.

The law also requires the insurance commissioner to report to the Hawaii Legislature in 2031 on the effectiveness of the discretionary examination process to help determine whether the approach should be extended or made permanent.

The legislation gives the Hawaii Insurance Division greater flexibility to allocate regulatory resources while preserving the commissioner's authority to examine any captive insurer when circumstances warrant. The changes are intended to align the state's examination process with a risk-based model while maintaining regulatory oversight.

"This legislation is significant because it reflects one of the principles that has long distinguished Hawaii as a premier captive domicile: strong regulation that is practical, responsive, and proportionate to risk," the Hawaii Captive Insurance Council (HCIC) president said.

The measure was developed through collaboration among the Hawaii Insurance Division, the Hawaii State Legislature, the HCIC, and industry stakeholders.

"As president of HCIC, I want to express my sincere appreciation to Governor Josh Green for signing this important legislation into law," the HCIC president said.

The statement also thanked Insurance Commissioner Scott Saiki, Deputy Commissioner Andrew Kurata, Senator Jarrett Keohokalole, Representative Scot Matayoshi, other members of the Hawaii Legislature, and HCIC members and industry professionals for their roles in advancing the legislation.

According to HCIC, the revised framework recognizes that mature, well-managed captive insurers may not require the same examination frequency as newer or higher-risk entities while maintaining regulatory standards. The organization said the changes support regulatory efficiency without compromising policyholder protection or the financial integrity of Hawaii's captive insurance industry.

Hawaii has been a captive insurance domicile for more than 40 years. HCIC said Act 255 continues the state's approach of updating its regulatory framework while maintaining its emphasis on regulatory oversight and collaboration between regulators and industry participants.