Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698746133614.pdf (Micronesia, Federated States of)
STANDING COMMITTEE REPORT NO.

21-69 RE: C.B.

NO.

21-299/R&D SUBJECT: TO ALLOW FOR LICENSED CAPTIVE INSURANCE COMPANIES TO BECOME DORMANT SEPTEMBER 30, 2020 The Honorable Wesley W. Simina Speaker, Twenty-First Congress Federated States of Micronesia Fifth Regular Session, 2020 Dear Mr. Speaker: Your Committee on Resources and Development, to which was referred C.B.

No.
No.

21-299, entitled: “A BILL FOR AN ACT TO AMEND CHAPTER 10 OF TITLE 37 OF THE CODE OF THE FEDERATED STATES OF MICRONESIA (ANNOTATED), AS AMENDED, BY ADDING A NEW SECTION 1017 TO ALLOW FOR LICENSED CAPTIVE INSURANCE COMPANIES TO BECOME DORMANT, AND FOR OTHER PURPOSES.,” begs leave to report as follows: The intent and purpose of the bill are expressed in its title.
Your Committee held a virtual public hearing on the said bill on Monday, September 28, 2020, at 1:00 p.m. Pohnpei and Kosrae time and 12:00 noon Chuuk and Yap time at the FSM Congress hearing room.

Chairman Dion G. Neth chaired the hearing.

Members of the Committee who Zoomed in and participated included Floor Leader Florensio S. Harper, who Zoomed in from Guam, Vice Chairman Aren B. Palik who Zoomed in from Kosrae State, SCRL 21-86/CB 21-299/R&D COMMITTEE STANDING COMMITTEE REPORT NO.

21-69 RE: C.B.
21-69 RE: C.B.

NO.

21-299/R&D SUBJECT: TO ALLOW FOR LICENSED CAPTIVE INSURANCE COMPANIES TO BECOME DORMANT SEPTEMBER 30, 2020 members Derensio S. Konman and Victor Gouland who Zoomed in from Chuuk and Isaac V. Figir who zoomed in from Yap.

Vice Speaker Esmond B. Moses was present.

Those in attendance included: Jim Moonier, Mark Heath, Kasio Mida from MRA; Mr. Nakama Sana, Insurance Commissioner, Mr. Pelsesar Petrus from the President’s Office and a representative from the Department of Justice.
Chairman Neth opened the hearing and yielded the floor to the witnesses.

Mr. Jim Moonier the purpose of the bill is to add a new section 1017 to title 37 of the Code of the Federated States of Micronesia entitled: “Dormancy”.

According to representatives from Micronesian Registrar Advisors (MRA), the intent of the bill is to allow Captive Insurance Company to go into dormancy stage.

Currently, there is no dormancy provision in title 37 of the FSM Code.
In reviewing the proposed bill as submitted, your Committee was informed that the bill is to allow for licensed captive insurance companies to become dormant.

According to Jim Moonier, the proposed dormancy status is a market-oriented strategy purported to keep captive insurance from winding up and leave the FSM.

Currently, there are twenty-four licensed captive insurance companies in the FSM, and due to this COVID-19 pandemic, these licensed captive insurance companies face challenging times.
Sometimes these licensed captive insurance companies find that they do not need to use their captive insurance company for a year or two if the commercial insurance market can provide better coverage.

So dormancy encourages businesses to keep their captive insurance company in the Federated States of Micronesia instead of shutting it down.

If the bill becomes law, captive insurance companies who registered to do business in the FSM can seek dormant status.
Currently, title 37 of the FSM Code is silent on “dormancy”; therefore, the proposed amendment to title 37 2 STANDING COMMITTEE REPORT NO.

21-69 RE: C.B.

NO.

21-299/R&D SUBJECT: TO ALLOW FOR LICENSED CAPTIVE INSURANCE COMPANIES TO BECOME DORMANT SEPTEMBER 30, 2020 of the FSM Code allows any captive insurance company who may wish to temporarily cease conducting insurance business to apply to the Insurance Commissioner to place its business license in a dormant status.
Your Committee had asked the Insurance Commissioner the internal process involved if a captive insurance wishes to seek dormancy status.

The Insurance Commissioner stated that since there is no dormancy provision in title 37 of the FSM Code, they have not issued any certificate of dormancy status.

The Insurance Commission stated that he is only aware of winding up of captive insurance company.
The Insurance Commissioner informed the Committee that before a captive insurance company elects to wind up its operation, the Insurance Commissioner must ensure that that captive insurance company does not have any financial obligations.

The captive insurance that intents to wind up its operation should have a clear financial record (no outstanding debts) before it can wind up its operation.
Your Committee noted that there is no timeframe as to a time period that a captive insurance can elect to be in a dormancy status.

Therefore, your Committee inquired on who dictates the dormancy period of a captive insurance company that had elected to be in a dormancy status.

According to the witnesses, a captive insurance company who is in dormancy status can apply to the Insurance Commissioner for reinstatement upon demonstrating that it is in full compliance with all applicable laws and regulations.
Your Committee had inquired whether there is a need to define “dormancy” in title 37 of the FSM Code.

The witnesses indicated that the proposed amendment to title 37 of the FSM Code, particularly section 1017 is sufficed since it clarifies the intended purpose of dormancy status.

Your Committee was informed that all leading captive insurance domiciles, including Hawaii and Vermont, have 3 STANDING COMMITTEE REPORT NO.

21-69 RE: C.B.

NO.
21-69 RE: C.B.

NO.

21-299/R&D SUBJECT: TO ALLOW FOR LICENSED CAPTIVE INSURANCE COMPANIES TO BECOME DORMANT SEPTEMBER 30, 2020 adopted dormancy laws within the past five years to encourage businesses to keep their captive insurance company in existence even in years that it conducts no insurance business.

Your Committee on Resources and Development is in accord with the intent and purpose of C.B.
21-299 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.

4 STANDING COMMITTEE REPORT NO.

21-69 RE: C.B.

NO.
21-69 RE: C.B.

NO.

21-299/R&D SUBJECT: TO ALLOW FOR LICENSED CAPTIVE INSURANCE COMPANIES TO BECOME DORMANT SEPTEMBER 30, 2020 Respectfully submitted, /s/ Dion G. Neth Dion G. Neth, chairman Aren B. Palik, vice chairman /s/ Tiwiter Aritos Tiwiter Aritos, member /s/ Derensio S. Konman Derensio S. Konman, member /s/ Peter M. Christian Peter M. Christian, member /s/ Isaac V. Figir Isaac V. Figir, member /s/ Victor V. Gouland Victor Gouland, member 5