HB 116-COMMERCIAL FISHING INSURANCE CO-OP  2:39:16 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of 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." 2:39:43 PM REPRESENTATIVE LOUISE STUTES, District 5, Alaska State Legislature, Juneau, Alaska, as sponsor of HB 116 she read the following: [Original punctuation provided.] • Before you is HB 116, sponsored by the House Special Committee on Fisheries by request of the Joint Legislative Task Force on Evaluating Alaska's Seafood Industry. • As a member of the that task force, along with you Mr. Chairman, it is my honor to bring this bill forward on behalf of the fishing industry. 2:40:24 PM REPRESENTATIVE STUTES continued with the summary of HB 116: Pursuant recommendation 10 (a) of task force, 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 being regulated under Title 21, the State's insurance code. • There are already three such insurance pools operating in Alaska, but they're umbrellaed under an organization based in Washington State, which has a commercial fishing carve out in its insurance code. Those pools, managed by the Purse Seine Vessel Owners' Association, include the Seine Vessel's Reserve, which provides insurance to seiners in Alaska, the Southeast Alaska Fishermen's Alliance Reserve which insures gillnetters and trollers in Southeast and Central Alaska, and finally the Bristol Bay Reserve which insures gillnetters in their area. Combined, the three pools insure around 840 vessels. • Rising premiums 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 than insuring individual vessels, as well as lower costs for our fishermen. • Some of the benefits of a commercial fishermen owned pool could be: 2:42:29 PM REPRESENTATIVE STUTES continued with the summary of HB 116: -Lower premiums -The ability to structure itself to meet the needs of the Alaska Fishing Industry. For example, the pool could have underwriting guidelines that allow for the insurance for wooden vessels, older vessels, and/or vessels that have been unable to purchase insurance in the commercial market. -These pools would have a board of directors comprised of fishermen that are members of the pool who make the decisions for which applications are accepted into the pool, providing smart local control, as well as an additional layer of knowledge about vessels who apply. -Pools can also offer dividends for good loss experience or credits against future premiums in years where the pool performs well against vessel claims and losses. • With operating costs at an all-time high and fishing markets at an all-time low, House Bill 116 seeks to provide lower cost and easier to access insurance alternatives for Alaska's commercial fishing fleet • This bill comes at no cost to the state and supports our fishing industry by simply allowing Alaska based commercial fishing insurance cooperatives to form. • Again, this is a direct recommendation of the joint Legislative Task Force Evaluating Alaska's seafood industry. 2:44:49 PM CHAIR BJORKMAN announced invited testimony on HB 116. 2:45:07 PM TRACY WELCH, Executive Director, United Fisherman of Alaska, testified by invitation on HB 116. She said rising insurance costs have become one of the industry's biggest challenges, making coverage unaffordable for some vessel owners. She added that allowing cooperative insurance pools to operate in Alaska, as HB 116 proposes, would lower costs and reduce risk for small fishing businesses. 2:46:50 PM SENATOR YUNDT commented that HB 116 is great legislation. 2:47:29 PM CHAIR BJORKMAN asked if HB 116 simply allows a group of fishermen to pool funds to cover losses and whether HB 116 is any more complex than that. 2:47:46 PM LORI WING-HEIER, Director, Division of Insurance, Anchorage, Alaska, answered questions on HB 116. She confirmed that HB 116 mirrors Washington's insurance code, allowing fishermen to form cooperative insurance pools that they manage and control collectively, including decisions on underwriting, rates, and reinsurance. 2:48:18 PM CHAIR BJORKMAN asked whether an insurance pool could refuse to cover a member's losses if that member caused problems for others, and whether the individual would have any recourse to the state for payment. 2:48:34 PM MS. WING-HEIER explained that the pool could not refuse to pay a member's losses, but the insurance pool could decide not to insure that person. 2:48:49 PM SENATOR YUNDT asked how many other industries in Alaska have implemented a similar approach.  2:48:54 PM MS. WING-HEIER replied that several nontraditional insurance models exist in Alaska, such as the Alaska Municipal League's Joint Insurance Association, small insurers like URICA Energy Management, and captives purchased out of state. However, Alaska has not yet authorized or established captive insurance within the state. 2:50:02 PM BOB KEHOE, Executive Director, Purse Seine Vessel Owners Association, Seattle, Washington testified in support of HB 116. He said the bill is a good alternative, noting that his organization already manages three insurance pools for Alaska vessels. He encouraged other fishing groups to collaborate, consult marine insurance brokers, and consider forming similar pools. [CHAIR BJORKMAN concluded invited testimony on HB 116.] [CHAIR BJORKMAN held HB 116 in committee.]