The New Jersey Assembly approved the final version of a bill that can make New Jersey a captive insurance domicile. Bill A2360 was approved by the full assembly with bipartisan support. The bill now awaits action by the Senate.
Assemblyman Gary Schaer and Assemblywoman Denise Coyle were the primary sponsors on the bill. Assemblyman Schaer said that this is “going to have a tremendous positive development effect for the state.” The bill was approved with a vote of 77-0 leading Assemblywoman Coyle to say that “this is a strong sign that we are serious about creating jobs by offering a way for businesses to reduce their costs and manage their insurance premiums, which will ultimately lead to more jobs and prosperity.” Assemblyman Schaer added that initiatives like this fuel a process for growth that he has previously and will continue to support.
The legislation is modeled after the Vermont captive insurance statutes where the captive insurance industry is one of the top employers in the state. Over the years, Vermont has developed its captive insurance infrastructure to become the leading “domicile” in the United States and second to Bermuda in a worldwide tally. When these jurisdictions originally enacted legislation to create captive insurance companies, business tourism was a driving force behind the industry. Since regulations require a physical presence and at least annual meeting within the jurisdictions, provincial attractions provided an opportunity to promote tourism in conjunction with captive company annual meetings. While today, this might be a consideration for some captives of smaller privately held companies, larger corporations will favor geographic convenience and industry infrastructure instead. New Jersey is geographically convenient and in the heart of the nation’s financial corridor from Boston to Washington, DC. It’s Department of Banking and Insurance is headed by Commissioner Thomas Considine, a former insurance industry executive.
“There are several opportunities for states, corporations, and citizens to benefit from this proposed legislation in New Jersey”, said Gregg Sgambati, President of the New Jersey Captive Insurance Association (NJCIA).
Captive insurance industries have been a boon to the economies of several states. These states have looked to this new industry to:
-generate tax revenues
-create or retain jobs
-bring premium tax revenues in state when they may be presently paid to another state
-create alternative sources of risk transfer to lower insurance costs for in-state businesses
-create a source of risk transfer by filling gaps where insurance does not exist
-give a boost to the tourism industry due to a requisite annual board meeting and industry conference.
Although captive insurance companies are usually out of the public eye, a few captives have recently garnered notoriety. Still, the significance of their captive nature has gone unnoticed. The World Trade Center Captive Insurance Company was incorporated and created in New York with funding from the FEMA in July 2004. It was funded with $1 billion. It was created because traditional insurers were unwilling to insure rescue and cleanup operations at Ground Zero. As of March 2008, the captive’s total operational expenditures of the company have amounted to $102 million. This includes administrative costs (e.g., staff salaries and office expenses; compensation for professional services (e.g., banking and accounting activities); and claims related expenses (e.g., legal fees and claims administration). This surely translated into a variety of jobs at different levels.
The question of how captive insurance companies can impact or will be impacted by the healthcare bill requires further investigationundefinedand should provide for interesting discussion. According to Strategic Risk Solutions in Boston, group health insurance has been a growth area for captives over the past couple of years.
“We hope that the Senate will look at this bill soon. We will provide whatever assistance that we are asked to provide”, said Gregg Sgambati. “In addition, we are prepared to start up the industry by booking our first trade show for the beginning of 2011 if begins to move forward. I believe that this type of legislation fits into the Governor’s strategy for industry strengthening and job creation and we only hope that he will see this as important legislation to sign into law if passed by the Senate. “
NJCIA is the trade association for the future captive insurance industry in New Jersey. For more information and membership please see us at www.njcia.org or contact Gregg Sgambati at (201) 252-2444 or firstname.lastname@example.org.