Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698746164472.pdf (Micronesia, Federated States of)
STANDING COMMITTEE REPORT NO.

21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 The Honorable Wesley W. Simina Speaker, Twenty-First Congress Federated States of Micronesia Third Special Session, 2019 Dear Mr. Speaker: Your Committee on Resources and Development, to which was referred C.B.

No.
No.

21-95, entitled: “A BILL FOR AN ACT TO FURTHER AMEND TITLE 37 OF THE CODE OF THE FEDERATED STATES OF MICRONESIA (ANNOTATED), AS AMENDED, BY AMENDING SECTION 1003 THEREOF, AS AMENDED BY PUBLIC LAW NO.
18-71, TO PROVIDE THAT CAPTIVE INSURANCE LICENSING IS UNDER THE AUTHORITY OF THE INSURANCE COMMISSIONER; BY ENACTING A NEW SECTION 1003A TO PROVIDE THAT AN APPLICATION FOR CAPTIVE INSURANCE IS DEEMED APPROVED IF THE APPLICATION IS NEITHER APPROVED NOR DENIED WITHIN 14 DAYS OF ITS RECEIPT BY THE COMMISSIONER; BY AMENDING SECTION 1008 THEREOF, TO PROVIDE THAT THE PAYMENT OF CAPTIVE INSURANCE COMPANY DIVIDENDS IS UNDER THE AUTHORITY OF THE INSURANCE COMMISSIONER, AND FOR OTHER PURPOSES.”, begs leave to report as follows: The intent and purpose of the bill are expressed in its title.
SCRL 21-41/CB 21-95/R&D COMMITTEE STANDING COMMITTEE REPORT NO.

21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 BACKGROUND On November 14, 2019, the President transmitted a bill (C.B.

No.

21-93) to Congress through Presidential Communication No.

21-136.

The bill proposes to amend section 202 of title 37 of the FSM Code.
The intent of the bill is to allow the FSM Insurance Board to delegate some of its powers to the Insurance Commissioner or to a captive insurance expert.

After further consultations by some of the members and staff of the FSM Congress with the Department of Justice and the representatives of the Micronesian Registry Advisors (MRA) on Congressional Bill No.

21-93, Congressional Bill No.

21-95 was drafted as an alternative to C.B.

No.


21-93, and the said bill was later assigned to your Committee on Resources and Development.

Your Committee on Resources and Development held a public hearing on Congressional Bill No.

21-95 on Wednesday, November 27, 2019, at the High Tide restaurant in Chuuk State.
Witnesses present were: Mr. Steve Baker, Mr. Jim Moonier and Mr. Kasio Mida from the Micronesian Registry Advisors (MRA); Assistant Attorney General Jun Bacalando from the Department of Justice; and the Insurance Commissioner Mr. Nakama Sana.

Chairman Dion G. Neth opened the hearing and gave the representatives from the MRA to comment on the bill (C.B.

No.

21-95).

Mr. Jim Moonier from the MRA explained that the MRA and the Department of Justice were working on the initial bill (C.B.

No.
No.

21-93) that was transmitted earlier.

Given that C.B.

No.

21-95 is introduced, MRA is in agreement with the said bill.

Mr. Moonier informed your Committee that the challenge the MRA has experienced in the past was that the Insurance Board cannot expedite its decisions on the approving or rejection of captive insurance applications.

The consequence of this is that the MRA has lost two potential captive insurance companies and they cannot afford this.
Mr. Moonier understands that the delay 2 STANDING COMMITTEE REPORT NO.

21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 of the Insurance Board in approving or rejecting captive insurance company application is because there is no quorum of the Insurance Board.
Furthermore, Mr. Steve Baker from the MRA explained that MRA had followed the proper procedure by working with the Executive branch on the proposed amendments to title 37 of the FSM Code.

He commented that in order to improve the process of approving and rejecting captive insurance application, and not loosing more potential clients, the Insurance Commissioner can be authorized to approve or reject captive insurance applications instead of the Insurance Board.
Mr. Baker commented that the proposed bill is not going to take away the control of the Board.

The Board still has its other duties as enumerated in sections 202,204 and 207 of title 37 of the FSM Code.

Your Committee inquired what causes the delay of making the decision, is the Board incompetent, which is why the members of the Board are not capable in making a decision.

Further, your Committee inquired why the rush.


The MRA representatives explained that the Board cannot meet because there is no quorum.

Also the Board has to listen to the Insurance Commissioner and the Insurance Expert to give them well-informed decisions.

There are times where a captive insurance company is about to realize a dividend, but the failure of the Board to meet and make a prompt decision is the issue.

C.B.

No.
21-95 - Proposed Amendments The powers of the Board to be delegated to the Insurance Commissioner, as proposed in the bill include: - power to issue license to captive insurance company and license to captive insurance manager; - to receive application of captive insurance license; - to review the application of captive insurance license by taking into consideration certain factor set out in section 1003(2); - receive license fee under subsection 1003(3); - sign captive insurance license under section 1003(6); 3 STANDING COMMITTEE REPORT NO.
21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 - issue and sign license of captive insurance manger; - and review and approve application to declare dividends under section 1008.

Your Committee wishes to offer the following amendments to the bill: 1.

Page 6, line 11, delete “14” and insert “30” in lieu thereof.

2.
2.

Page 7, following line 3, insert new bill sections 4, 5, 6, and 7 to read as follows: “Section 4.

Title 37 of the Code of the Federated States of Micronesia (Annotated), as amended, is hereby further amended by enacting a new section 1008A to read as follows: ‘Section 1008A.

Dividends – Approval.


A dividend proposed in accordance with section 1008 of this title shall be deemed approved if the dividend proposal is neither approved nor denied within 30 days of receipt of the proposal by the Commissioner.’ Section 5.

Section 1013 of title 37 of the Code of the Federated States of Micronesia (Annotated) is hereby amended to read as follows: 4 STANDING COMMITTEE REPORT NO.

21-34 RE: C.B.

NO.
21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 ‘Section 1013.

Legal Investments.

(1) Each captive insurance company shall be allowed to invest any of its funds without limitation in any government obligation issued by and backed by the full faith and credit of the Government of the United States of America or the Government of Japan.
(2) Each captive insurance company shall be allowed to invest in any type of investment subject to a limitation of ten percent of total captive insurance company assets in any one issuer, if that investment is rated by one of the following: (a) Rating and Investment Information, Inc. rating of BBB or higher; (b) Moody’s rating of Baa3 or higher; (c) S&P rating of BBB-or higher; (d) Fitch rating of BBB-or higher; (3) Other investments as approved by the [Insurance Board] Commissioner; (4) A captive insurance company may make a loan to or an investment in its parent company or affiliates, subject to the approval of the [Insurance Board] Commissioner.
Any such loan or investment must be evidenced by documentation approved by the [Insurance Board] Commissioner.

5 STANDING COMMITTEE REPORT NO.

21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 Loans of minimum capital and surplus funds required by section 1007 of this chapter are prohibited.
(5) The Commissioner [and Insurance Board] may prohibit or limit any investment that threatens the solvency or liquidity of any such captive insurance company.’ Section 6.

Title 37 of the Code of the Federated States of Micronesia (Annotated), as amended, is hereby further amended by enacting a new section 1013A to read as follows: ‘Section 1013A.

Loans and Investments – Approval.


A loan or investment proposed in accordance with section 1013 of this title shall be deemed approved if the loan or investment is neither approved nor denied within 30 days of receipt of the proposal by the Commissioner.’ Section 7.

Title 37 of the Code of the Federated States of Micronesia (Annotated), as amended, is hereby further amended by enacting a new section 1016A to read as follows: 6 STANDING COMMITTEE REPORT NO.

21-34 RE: C.B.

NO.
21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 ‘Section 1016A.

Business Plan Changes – Approval.


A business plan change proposed in accordance with regulations established or amended pursuant to section 1016 of this title shall be deemed approved if the business plan change is neither approved nor denied within 30 days of receipt of the proposed change by the Commissioner.’” Conclusion Your Committee on Resources and Development is in accord with the intent and purpose of C.B.
21-95 and recommends its passage on First Reading and that it be placed on the Calendar for Second and Final Reading in the form attached hereto C.B.

20-95, C.D.1.

7 STANDING COMMITTEE REPORT NO.

21-34 RE: C.B.

NO.
21-34 RE: C.B.

NO.

21-95/R&D SUBJECT: AMENDMENTS TO TITLE 37 OF THE FSM CODE (LICENSING/APPLICATION/DIVIDEND OF CAPTIVE INSURANCE COMPANY) DECEMBER 2, 2019 Respectfully submitted, /s/ Dion G. Neth Dion G. Neth, chairman /s/ Aren B. Palik Aren B. Palik, vice chairman Tiwiter Aritos, member /s/ Derensio K. Konman Derensio K. Konman, member Peter M. Christian, member /s/ Isaac V. Figir Isaac V. Figir, member /s/ Victor V. Gouland Victor V. Gouland, member 8