SENATE BILL REPORT

EHB 1697

BYRepresentatives Wang, Patrick and Vekich; by request of Department of Labor and Industries and State Investment Board

Regulating industrial insurance premium investments.

House Committe on Commerce & Labor

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):March 23, 1989

Senate Staff:Walt Corneille (786-7416)

AS OF MARCH 22, 1989

BACKGROUND:

The State Investment Board was established in 1981 to invest public trust and retirement funds.  The board is to establish investment policies and procedures designed to maximize return with a prudent level of risk except with respect to the Department of Labor and Industries' accident, medical aid and reserve funds.  Relative to the Department of Labor and Industries' funds, the board is required to establish investment policies and procedures designed to limit fluctuations in industrial insurance premiums and, subject to that purpose, maximize return at a prudent level of risk.  This mandate is in effect until July 1, 1989.

The different mandate for Department of Labor and Industries' funds was a result of legislation passed in 1988.  It required the State Investment Board to present a report to designated standing committees in the Senate and House of Representatives recommending necessary changes in investment policies relative to the funds of the Department of Labor and Industries.  The report was to include recommendations for appropriate accounting policies allowing stabilization of rates as well as maximizing investment return.

The report indicated the need to have an investment policy for the Department of Labor and Industries funds separate from those applicable to retirement funds.  Other recommendations were made on asset valuation techniques, investment objectives, investment policies and guidelines, minimizing fluctuation of income and premium levels and procedures for information flow. 

SUMMARY:

The expiration date of July 1, 1989 relative to the mandate of the State Investment Board's treatment of the Department of Labor and Industries' accident, medical aid and reserve funds is stricken.  The State Investment Board must continue to establish investment policies and procedures designed to limit fluctuations in industrial insurance premiums and subject to that purpose, maximize return at a prudent level of risk.

The State Investment Board must report annually on its investment activities for the funds of the Department of Labor and Industries.  The report must be provided to the Senate Committees on Financial Institutions and Insurance, and Economic Development and Labor, and the House Committee on Commerce and Labor.

Appropriation:    none

Revenue:    none