The bill was passed on a day when several economic development bills under the theme of “Back to Work NJ” were also moved forwarded. These bills are focused on jumpstarting the New Jersey economy and creating a friendlier business climate in the state. Voting was 39-0 in the Senate and 74-0 in the Assembly. Assemblyman Gary Schaer and Assemblywoman Denise Coyle are the bill’s leading primary sponsors.
“We have been in touch with the Governor’s office and expect him to sign it into law this month,” said Gregg Sgambati, President of the New Jersey Captive Insurance Association (NJCIA). “The Department of Banking and Insurance is behind this legislation and is looking forward to starting up the new industry.” I believe that this is a notable step forward in New Jersey’s commitment to lay the foundation for organizations to recognize New Jersey as a great place to do business.” The bill provides for economic impact through premium tax revenue and has the requirement that components of the captive insurance company be managed from within the state.
Captive insurance industries have been a boon to the economies of several states. The industries in these states have:
-generated additional tax revenues
-created or retained jobs
-returned premium tax revenues where they were otherwise being paid in another state
-created alternative sources of risk transfer that have lowered insurance costs for in-state businesses
-created a source of risk transfer by filling gaps where insurance does not exist
-given a boost to the tourism industry due to a requisite annual board meeting and industry conference.
NJCIA, the industry trade association, has been analyzing the market. At last year’s Captive Insurance Companies Association 2010 conference, it was noted that an increasing number of financial firms are forming captive insurance companies. New Jersey’s location in the heart of the nation’s financial corridor (Boston to Washington, DC) makes it geographically convenient to many large firms. Whereas previously, parent companies may have elected to set up their captive insurance companies in jurisdictions that had prominent tourism industries, today large companies prefer a geographically convenient domicile. In addition, according to Strategic Risk Solutions in Boston, interest in healthcare related captive insurance appears to be growing. Entrepreneurial managers are also put on notice. Captive insurance has insured risks that traditional insurance companies will not cover because of their small market and low probability of scaling up that line of business.
“There are several opportunities for states, corporations, and citizens to benefit from this industry”, said Sgambati. “It should be said that the legislative process leading up to the passage of this bill was a model of cooperation and shared vision by both political partiesundefineda shared goal to use legislation to create jobs for the citizens of New Jersey and new tax revenue sources for funding the government while at the same time, saying to the business community that New Jersey is “Taking Care of Business.”
NJCIA will host its first Leadership Summit during the week of April 4, 2010 at the Hilton Newark Penn Station. This summit will bring together industry participants to network, introduce the state’s regulators, and design a timeline for the NJ captive insurance industry. An annual conference will be planned for Atlantic City later in the year. A public bill signing has also been requested at the governor’s office.