SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27771)
Filings Under the Public Utility Holding Company Act of 1935, as amended ("Act")
December 5, 2003
Notice is hereby given that the following filing(s) has/have been made with the Commission pursuant to provisions of the Act and rules promulgated under the Act. All interested persons are referred to the application(s) and/or declaration(s) for complete statements of the proposed transaction(s) summarized below. The application(s) and/or declaration(s) and any amendment(s) is/are available for public inspection through the Commission's Branch of Public Reference.
nterested persons wishing to comment or request a hearing on the application(s) and/or declaration(s) should submit their views in writing by December 29, 2003, to the Secretary, Securities and Exchange Commission, Washington, D.C. 20549-0609, and serve a copy on the relevant applicant(s) and/or declarant(s) at the address(es) specified below. Proof of service (by affidavit or, in the case of an attorney at law, by certificate) should be filed with the request. Any request for hearing should identify specifically the issues of facts or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in the matter. After December 29, 2003, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective.
KeySpan Corporation, et al. (70-9957)
KeySpan Corporation ("KeySpan"), a registered holding company, and its subsidiary, KeySpan Insurance Company ("KIC") (collectively, "Applicants"), One MetroTech Center, Brooklyn, New York 11201, have filed, under sections 9(a), 10, 12(b) and 13(b) of the Act and rules 45 and 54 under the Act, a post-effective amendment to a previous application.
Applicants ask to expand the authority granted to KeySpan by order dated April 24, 2003 (Holding Co. Act Release No. 27669) ("Captive Order"). In the Captive Order, the Commission authorized KeySpan to organize a subsidiary to engage in activities associated with a captive insurance company. In accordance with the Captive Order, KeySpan formed KIC to provide certain insurance services to KeySpan and its subsidiaries ("KeySpan System"). Applicants request authority for KIC to expand the insurance it provides to include property, boiler and machinery, and "all risk" insurance services for the KeySpan System.
The Captive Order authorized KeySpan to organize a captive insurance company that would reinsure certain commercial insurance bought by the KeySpan System from commercial insurance companies. In particular, KIC is authorized to provide to the KeySpan System automobile liability, workers' compensation and general liability insurance coverage. In addition, KIC is authorized to provide general liability and workers' compensation insurance to its principal contractor under an Owner's Controlled Insurance Program ("OCIP"). The contractor provides scheduled gas main construction and maintenance to the KeySpan System. Except for the general liability and workers' compensation insurance provided to the principal contractor under OCIP, KIC does not intend to extend or provide to any non-affiliated company any insurance services, unless otherwise expressly authorized by the Commission. Currently, KIC assumes the risk of the more predictable loss layer from the commercial insurers for automobile and general liability losses and for workers' compensation. Commercial insurance continues to be purchased for "unpredictable" losses above the predictable loss layers for automobile and general liability and for workers' compensation from various commercial insurance companies. To the extent that KIC procures insurance at a lower cost than could be obtained through traditional insurers, the savings in the premiums flow through ratably to the KeySpan System companies through the operation of the allocation methodology used to establish premiums.
Applicants propose that KIC offer property, boiler and machinery, and "all risk" insurance services to the KeySpan System. KeySpan currently insures these property-related risks through the traditional, commercial insurance market. It has various deductibles ranging from $100,000 on common structures to $2,500,000 on the KeySpan System's power generation units. It purchases limits up to $2 billion from the commercial insurance market. Due to the state of the commercial insurance market, KeySpan has not been able to obtain coverage below the minimum $100,000 deductible. KeySpan says that this has created a burden for some of the smaller KeySpan System companies that do not want to expose themselves to such a large self-insured retention.
KIC could be utilized, Applicants state, to provide property-related coverage with smaller self-insured retentions to those KeySpan System companies that do not have such a large capacity for risk. KIC would allocate premiums based on the property values at KeySpan System company locations down to a level of a $10,000 deductible. This added service would not increase costs to the KeySpan System because such costs are currently, and would continue to be, paid through operating expenses, Applicants state. There would be no additional staffing requirements for KeySpan System companies. To the extent that KIC can provide insurance at a lower cost than that which could be obtained through traditional insurers, the savings will continue to flow through ratably to the KeySpan System companies through the allocation methodology used to establish premiums.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Margaret H. McFarland