03/24/2025 03:15 PM House LABOR & COMMERCE

           HB 116-COMMERCIAL FISHING INSURANCE CO-OP                                                                        
                                                                                                                                
3:17:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced that the  first order of business would                                                               
be  HOUSE  BILL  NO.  116,   "An  Act  exempting  from  insurance                                                               
regulation  cooperative agreements  entered into  by two  or more                                                               
persons engaged in  commercial fishing for the  purpose of paying                                                               
claims or losses."                                                                                                              
                                                                                                                                
3:17:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LOUISE STUTES, Alaska  State Legislature, as prime                                                               
sponsor, introduced HB 116, as follows:                                                                                         
                                                                                                                                
     Before  you  is  HB  116, an  act  exempting  insurance                                                                    
     regulation cooperative  agreements entered into  by two                                                                    
     or more  persons engaged in commercial  fishing for the                                                                    
     purposes  of claims  or losses.   This  legislation was                                                                    
     brought  forward by  the [House  Special Committee  on]                                                                    
     Fisheries  ...  by  request of  the  Joint  Legislative                                                                    
     Taskforce on  Evaluating Alaska's Seafood  Industry, of                                                                    
     which I was a member.                                                                                                      
                                                                                                                                
     The purpose this bill is  to allow commercial fishermen                                                                    
     to form  insurance pools to provide  lower cost, easier                                                                    
     access to  insurance for  commercial fishermen.   These                                                                    
     commercial  fishermen-owned   insurance  pools  already                                                                    
     exist  in  Alaska but  are  housed  in an  organization                                                                    
     based in Washington state, which  already has the carve                                                                    
     out in  their insurance code.   This legislation simply                                                                    
     allows  Alaska-based  organizations  to  form  here  in                                                                    
     Alaska.   HB 116  seeks to  provide a  more attractive,                                                                    
     lower-risk  alternative   for  underwriters   ...  that                                                                    
     insure individual  vessels, as well as  lower costs for                                                                    
     our fishermen.                                                                                                             
                                                                                                                                
3:19:37 PM                                                                                                                    
                                                                                                                                
MATT GRUENING, Staff, Representative  Louise Stutes, Alaska State                                                               
Legislature, on  behalf of Representative Stutes,  prime sponsor,                                                               
gave the sponsor statement for  HB 116 [included in the committee                                                               
file], which read as follows [original punctuation provided]:                                                                   
                                                                                                                                
     House Bill 116 would  allow for member-owned commercial                                                                    
     fishing insurance cooperatives based  in Alaska to form                                                                    
     without being considered  an insurer. Specifically, the                                                                    
     bill would  allow commercial fishermen to  enter into a                                                                    
     cooperative insurance  agreement to pay  claims arising                                                                    
     from liability or damage to  a vessel without having to                                                                    
     comply with Title 21, the State's insurance code.                                                                          
                                                                                                                                
     There are already three  such insurance pools operating                                                                    
     in  Alaska;  however,  they  are  based  in  Washington                                                                    
     State,  which already  has a  carve out  for commercial                                                                    
     fishermen  in  its  insurance  code.  This  legislation                                                                    
     would simply allow similar organizations based in                                                                          
     Alaska  to  form, pool  their  funds,  and establish  a                                                                    
     commercial fishing insurance cooperative.                                                                                  
                                                                                                                                
     Rising costs  and availability of insurance  serve as a                                                                    
     barrier  to  operating  for Alaska's  aging  commercial                                                                    
     fishing fleet. Underwriters  have been raising premiums                                                                    
     on  individual  vessels  and have  become  increasingly                                                                    
     selective  of  which  vessels  they  insure.  Insurance                                                                    
     pooling  can  provide  a more  attractive,  lower  risk                                                                    
     alternative for  underwriters, as  well as  lower costs                                                                    
     for our fishermen.                                                                                                         
                                                                                                                                
     With operating  costs at an  all-time high  and fishing                                                                    
     markets at  an all-time  low, House  Bill 116  seeks to                                                                    
     provide lower cost  insurance alternatives for Alaska's                                                                    
     commercial fishing                                                                                                         
     fleet.                                                                                                                     
                                                                                                                                
3:22:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS  opened  public  testimony on  HB  116.    After                                                               
ascertaining  that there  was no  one who  wished to  testify, he                                                               
closed public testimony.                                                                                                        
                                                                                                                                
3:23:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COULOMBE  asked  for clarification  that  HB  116                                                               
would provide the opportunity  to create cooperatives ("co-ops"),                                                               
but that it would not actually create the co-ops.                                                                               
                                                                                                                                
REPRESENTATIVE STUTES confirmed that was correct.                                                                               
                                                                                                                                
MR.  GRUENING, in  response to  a  follow-up from  Representative                                                               
Coulombe on  state contribution, replied  that there would  be no                                                               
capitalization requirement  due to  the Title  21 exemption.   He                                                               
added that a  critical mass would be required  for pool solvency,                                                               
which  would entail  collecting  enough  interest, gathering  the                                                               
capital,  hiring a  broker, and  hiring an  actuary to  raise the                                                               
capital through the private market.                                                                                             
                                                                                                                                
REPRESENTATIVE  STUTES summarized  that the  proposed legislation                                                               
does not seek funds from the State of Alaska.                                                                                   
                                                                                                                                
3:25:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CARRICK  asked which specific statute  in Title 21                                                               
of  Alaska  Statute (AS)  doesn't  allow  fishermen to  create  a                                                               
fishing co-op.   She asked if there are any  specific examples of                                                               
insurance  code in  Washington state  that reference  fishing co-                                                               
ops.                                                                                                                            
                                                                                                                                
MR. GREUNING  replied that the  decision was made  after speaking                                                               
with the  Division of Insurance  after discovering  the carve-out                                                               
in the Washington State Code.                                                                                                   
                                                                                                                                
3:26:08 PM                                                                                                                    
                                                                                                                                
HEATHER  CARPENTER,  Deputy   Director,  Division  of  Insurance,                                                               
Department  of  Commerce,  Community,  and  Economic  Development                                                               
(DCCED) explained  that the "scope  of code" and  "application of                                                               
title"  is  being  amended  in  order  to  create  pools  without                                                               
following the rest  of Title 21.  She further  explained that the                                                               
decision was made after feedback from legal counsel.                                                                            
                                                                                                                                
REPRESENTATIVE  CARRICK further  asked whether  there were  other                                                               
industries  in  Washington  situated  similarly  to  the  fishing                                                               
industry.                                                                                                                       
                                                                                                                                
MS. CARPENTER  responded that she  did not know the  specifics of                                                               
the  Washington  State  Code  but added  that  there  were  other                                                               
industries that had pooling options.                                                                                            
                                                                                                                                
3:28:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES,  in response to  Representative Coulombe's                                                               
question, confirmed that HB 116  was at the recommendation of the                                                               
seafood task force.                                                                                                             
                                                                                                                                
3:28:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS  asked if  the  Division  of Insurance  has  any                                                               
concerns regarding the implications under HB 116.                                                                               
                                                                                                                                
MS. CARPENTER replied  that the Division of  Insurance is neutral                                                               
on the proposed policies of HB 116.                                                                                             
                                                                                                                                
REPRESENTATIVE STUTES added  that HB 116 does  not guarantee that                                                               
fishermen  would  create a  fishing  cooperative,  it would  just                                                               
allow for them to create one.                                                                                                   
                                                                                                                                
3:29:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COULOMBE  asked what  "premium tax revenue"  is as                                                               
it  is mentioned  in HB  116.   She commented  that she  found it                                                               
"interesting" that  the state would  have to pay $72  million for                                                               
the  insurance  costs  that  would   be  created  under  HB  116,                                                               
particularly given the high cost of healthcare.                                                                                 
                                                                                                                                
MS. CARPENTER answered  that the Division of  Insurance taxes all                                                               
insurance policies,  bringing approximately $72 million  into the                                                               
general fund.   She  explained that policies  under Title  21 are                                                               
taxed.   She  noted that  the Division  of Insurance  revised the                                                               
fiscal note  to show a  zero fiscal impact upon  realization that                                                               
there would be no immediate loss.                                                                                               
                                                                                                                                
3:31:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CARRICK  asked whether there were  inquiries about                                                               
"carve-outs" for  other industry  groups in  Alaska, such  as the                                                               
homebuilders.                                                                                                                   
                                                                                                                                
MS. CARPENTER  explained that the  Division of Insurance  has had                                                               
conversations about pooling insurance costs together.                                                                           
                                                                                                                                
3:32:40 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:32 p.m. to 3:33 p.m.                                                                       
                                                                                                                                
3:33:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HALL moved  to  report  HB 116  out  of committee  with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There  being no  objection, HB  116 was  reported from  the House                                                               
Labor and Commerce Standing Committee.