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.