SB 88-STATE INSUR. CATASTROPHE RESERVE ACCT.                                                                      
                                                                                                                                
2:00:22 PM                                                                                                                    
CHAIR COSTELLO announced the consideration  of SENATE BILL NO. 88                                                               
"An  Act  relating to  the  state  insurance catastrophe  reserve                                                               
account; and providing for an effective date."                                                                                  
                                                                                                                                
She advised that  the Rules Committee introduced the  bill at the                                                               
request of  the governor  and noted who  was available  to answer                                                               
questions. She said this is  the second hearing and her intention                                                               
is  to  hear  public  testimony  and look  to  the  will  of  the                                                               
committee.                                                                                                                      
                                                                                                                                
CHAIR COSTELLO  read the following  transmittal letter for  SB 88                                                               
into the record to refresh members' recollection of the bill:                                                                   
                                                                                                                                
     The  State   of  Alaska,  through   its  self-insurance                                                                    
     program, maintains insurance  coverage to protect state                                                                    
     assets  and   operations,  and  adequate   reserves  to                                                                    
     satisfy  all  foreseeable  claims  or  judgements.  The                                                                    
     State   Insurance  Catastrophe   Reserve  Account   was                                                                    
     established in  1987 to  obtain insurance,  establish a                                                                    
     self-insurance reserve,  and to satisfy  ongoing claims                                                                    
     and judgments. When it  was originally established, the                                                                    
     account  was primarily  intended as  a reserve  against                                                                    
     large   catastrophic  losses.   However,  because   the                                                                    
     reserve balance is capped at  $5,000,000, the State has                                                                    
     been  acquiring  excess  coverage   on  the  market  to                                                                    
     adequately protect against  catastrophic losses. Market                                                                    
     forces  have  changed,   insurance  rates  continue  to                                                                    
     increase, and  it is no  longer cost effective  for the                                                                    
     state  to  purchase  excess  insurance.  The  Reserve's                                                                    
     balance  is   typically  capitalized   through  lapsing                                                                    
     appropriations  at  the  end of  the  fiscal  year.  By                                                                    
     increasing the statutory cap  to $50,000,000 and slowly                                                                    
     increasing  the Reserve  balance, the  State will  once                                                                    
     again  be able  to fully  self-insure against  property                                                                    
     losses.  This change  is estimated  to save  $3 million                                                                    
     the first  year and  up to  $6 million  annually within                                                                    
     four years.                                                                                                                
                                                                                                                                
        This measure will provide the State flexibility,                                                                        
        control, and cost savings in its self-insurance                                                                         
     program.                                                                                                                   
                                                                                                                                
CHAIR COSTELLO determined  that the members had  no questions for                                                               
the director of the Division of Risk Management.                                                                                
                                                                                                                                
2:03:00 PM                                                                                                                    
CHAIR COSTELLO  opened public testimony  on SB 88;  finding none,                                                               
she closed public testimony and asked the will of the committee.                                                                
                                                                                                                                
2:03:18 PM                                                                                                                    
SENATOR HOLLAND  moved to report  SB 88, work  order 32-GS1689\A,                                                               
from  committee  with  individual  recommendations  and  attached                                                               
fiscal note(s).                                                                                                                 
                                                                                                                                
CHAIR  COSTELLO found  no  objection  and SB  88  moved from  the                                                               
Senate Labor and Commerce Standing Committee.