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  • 12 May 2011 12:04 PM | Gregg Sgambati (Administrator)

    Seeking Job Creation, States License Captive Insurance Companies

    By Gregg Sgambati, President, NJCIA, May 12, 2011

    In the mid 1970's, it took Bermuda just four years to grow its captive insurance industry 210%.  In the process the government taxed $2.5 billion in premiums, equivalent to $8.5 billion in 2011 dollars.  Noting Bermuda’s success, states adopted legislation to permit captive insurance companies in the U.S. and keep that tax revenue home.  This July, a part of the Dodd-Frank Act, the Nonadmitted and Reinsurance Reform Act, may lead some captive insurance companies located "offshore" to move "onshore" resulting in new tax revenues and jobs in those U.S. states with a captive insurance law.

    According to Andrew Barile of Andrew Barile Consulting, “Over these 33 years [since 1978], the number of captive insurance companies has grown to 5,000; in the next three years, the number of captives will grow to 10,000 captive insurance companies, in a global insurance setting.”

    Generally speaking, a captive insurance company is formed to cover particular risks of a business, a restricted group (i.e., doctor’s medical malpractice) or even a nonprofit.  While the risks covered has extended to areas such as cell phone warranties, the foundation of the industry rests in permitting companies or groups to only insure the risks of their constituents.  The insurance is often backed by multi-national reinsurance corporations and ultimately by the financial integrity of the captive’s owners.

    Applying to form a captive insurance company requires careful planning.  Andy Barile, in a recent article, outlined the steps of the feasibility study that a company must present to regulators before its captive company application is reviewed.  The feasibility study normally includes risk modeling, a business plan, actuarial review, and of course loss and financial studies.  “Feasibility studies for a captive are required for every regulatory domicile,” writes Barile.  Following their formation, captive insurance companies are highly regulated: all states require regular reporting, actuarial support for reserves, independent audits and examinations every three to five years.

    The New York Times' front page article intended to paint a controversial portrait of captive insurance companies.  The article puzzled many in the captive insurance industry and riled the 170 readers who were inclined to comment.  One should guard his emotions when he reads the catch-phrases dropped into the article such as a “secretive business," "a shell game," and "Bermuda-style financial wizardry."  And extra caution should be heeded if one were to listen to the NPR Program "The Takeaway" where host John Hockenberry self-proclaims this article to be a "big economic story" and goes on to suggest that it "echoes" John D. Rockefeller's secretive dealings with Standard Oil.  Thousands of captive insurance companies have been formed as part of an organization’s risk management strategy and in doing so, have helped balance owner's risks, improve balance sheets, and insure events that traditional insurance companies would not.

    Those in the insurance industry will notice some erroneous information in the article (particularly in regard to reserves) and will lament the attempt to link the industry to the mortgage crisis.  Those reading with attention to detail will see that the article infers causality without evidence.

    There is no doubt that scrutiny in any industry is a good thing and there has been interest in the captive insurance industry to discuss the scenarios referred to in the New York Times article.  However, the article is long on speculations and slightly high on spectacle.  One might say that it is difficult to present a case in a two to three inch newspaper column designed for a general readership, even by the well-respected writers of this article.  Perhaps if those affected by the industry made this a news event before the NY Times story, the interviews for the article would have elicited a more constructive response from state regulators and the industry.

    Surely captive insurance industry professionals will agree with one point in the NY Times’ article: "as changes to the nation’s health systems are phased in, such innovations [captive insurance] might even help hold down the cost of insurance for consumers...."  Innovation is definitely an inspiration for the captive insurance industry and innovation can reduce costs.

  • 21 Mar 2011 8:48 AM | Gregg Sgambati (Administrator)

    Mahwah, NJ, March 21, 2011:   The New Jersey Captive Insurance Association (NJCIA) has announced its charter Advisory Board.  NJCIA's Advisory Board will provide strategic guidance and industry leadership from within the organization.  The association has also announced a new logo as its first step toward re-branding the organization for the newly enacted captive insurance industry.

    Each charter board member is highly regarded in his or her area of expertise.  “The board’s high regard and standing within the industry will be beneficial for the association and the New Jersey captive insurance industry,” said Gregg Sgambati, President of NJCIA.  Since each board member has a different professional history, each will have an individual perspective on steering the organization.  Future board members will come from captive insurance companies.

    “The association is honored by the involvement of our charter board members, some of whom are in linked to the beginnings of the captive insurance industry,” said Sgambati.  No short list of individuals has the expertise to “do it all.”  For this reason, NJCIA sought a board comprised of individuals with broad and exceptional industry expertise.  The Advisory Board members are:

    Andrew Barile, President of Andrew Barile Consulting Corporation Inc. who has over 35 years of experience with an intricate knowledge of the insurance and reinsurance industries.

    Harry M. Baumgartner, of Bressler, Amery & Ross, P.C. who has more than 20 years of experience as an attorney and legal executive in the insurance industry with a significant record of achievement in private and corporate legal practice including the creation and operation of captive insurance companies.

    Leonard P. Crouse, CFE of The Towner Management Group who is one of the most respected professionals in the captive insurance world and who was the Deputy Commissioner and Director of Captive Insurance for the Vermont Department of Insurance for most of the past two decades.  Mr. Crouse holds an esteemed place in the history of captive insurance.

    Christina Mancini, CEO/Partner, Captive.com who, after 16 years with Captive.com has seen Captive.com become a leading source of news and information about the captive insurance industry.

    Herbert R. Selander, Jr., Managing Director, Marsh USA Inc. who has more than 40 years of experience in the insurance industry.  He has been a client executive for major Fortune 100 clients and is based in Morristown, NJ.

    Nicholas H. Teetelli, Chief Executive Officer, Maple Technologies, LLC who has extensive experience in the insurance industry, spanning nearly three decades particularly in specialty insurance product development, design and implementation, and reinsurance intermediation.

    Richard W. Wright, ARM, Senior Vice President, Willis Captive Consulting Practice who uses his deep industry knowledge to perform captive feasibility studies for his clients.  His background includes brokerage, consulting, and risk management with large property and casualty risk financing programs. Rick has helped form several new captives in various domiciles.

    Goals for the board this year include cooperating with the New Jersey Department of Banking and Insurance, promoting the new captive insurance industry, and guidance on member development and the member benefits package.  The board will meet twice yearly and hold quarterly conference calls.

    Gregg Sgambati has been involved in the captive insurance industry since 2006 and was previously an insurance producer.  His expertise is in business development and organizational leadership.  Having served as a leader of public service nonprofit for 7 years, he is now completing a Master of Public Administration at Columbia University’s School of International and Public Affairs.

    New Logo

    NJCIA has announced a new logo and branding strategy.  NJCIA’s new logos were graphically designed by the creative artists at Maple Technologies, LLC of Manalapan, NJ.  The logos recall George Washington’s historic Battle of Trenton from a time when New Jersey became known as the crossroads of the revolution.  In addition, the circular globe of the logo reflects the invention of the first commercially viable incandescent light bulb by Thomas Alva Edison at his Menlo Park, NJ laboratory.  The new logos may be seen at www.njcia.org.

    For additional information, please visit www.njcia.org or contact Gregg Sgambati of NJCIA at (201) 252-2444 or gregg.s@njcia.org.

    ###

    New NJCIA Logos

                   

  • 06 Jun 2010 7:26 AM | Gregg Sgambati (Administrator)
    Article at http://www.businessinsurance.com/article/20100606/ISSUE01/306069978
  • 26 May 2010 8:57 AM | Gregg Sgambati (Administrator)

    Mahwah, NJ, May 26, 2010:   On Thursday May 27th, a bill will be discussed by the New Jersey Senate Commerce Committee that can close down the New Jersey operations of several risk retention groups (RRGs).  Senate Bill 1823 (Makes sundry changes to taxicab laws) was amended to require that a taxicab owner have an insurance policy of an admitted insurance company which is a member of the New Jersey Property-Liability Insurance Guaranty Association.    That single sentence could make RRGs currently insuring taxis in New Jersey, no longer permissible to do so since it is generally accepted that RRGs are prevented from becoming Guaranty Association members by the federal RRG legislation.  One risk retention group will likely close its New Jersey office and reevaluate the jobs of six employees.  However, the greatest pain may come to the hundreds of taxi cab owners that may need to shop for new insurance and pay higher premiums.

    The rationale for the amendment is not evident but what is apparent is that it is a hard approach to achieve some outcome.  The most likely rationale is that it is a way to address concerns about the solvency of these taxicab RRGs.  RRGs are regulated in the state where they were formed and by the regulators of states where they do business.  One RRG that does business in New Jersey but is domiciled in South Carolina has been subjected to field examinations by New Jersey regulators--in their South Carolina offices.

    But if this isn't enough diligence to alleviate concerns about RRG solvency, NJCIA suggests a different approach: allow RRGs to provide an alternative type of collateral or purchase a special guaranty association membership instead of putting them out of business in New Jersey.

    NJCIA's top priority is to help New Jersey maintain a user-friendly environment for captive insurance companies, including RRGs.   "Our concern is that a legislative act that hurts RRGs will create the appearance that NJ does not have an innovative captive insurance regulatory environment," said Gregg Sgambati, President of NJCIA.  An innovative (and prudent) regulatory environment is one of the keys to a successful captive insurance industry.

    NJCIA’s first goal is to encourage the passage of captive legislation that will make New Jersey a captive insurance domicile.   This will create opportunities for jobs, tax and fee revenues, as well as other economic benefits.  In a giant step toward that end, Assembly Bill No. A2360, Regulates Captive Insurers, was moved out of committee to the full assembly on May 6, 2010.  But a pivotal amendment to the bill was incorporated at the last minute that deleted the mention of RRGs from the legislation.  This surprised those who were following the legislation.  The deletion of RRGs leaves somewhat of a hole in the proposed captive insurance legislation.  

    "But this is not a death knell for the captive insurance industry in New Jersey.  On the contrary, adversity often creates opportunity and we have an opportunity here," Sgambati said.  

    You can't question the logic behind removing RRGs from the bill when you understand that the bill would lower the tax rate for existing RRGs and result in a revenue contractionundefinedsomething no regulator or legislator would approve today.  But when you start a new industry, lower fees can entice new RRGs and captive insurance companies to form in the state.

    And starting a new regulated industry requires a departmental budget allocation to get it up and running.  So NJCIA recommends a solution: the law should include RRGs at their current tax rate for three years at which time it can revert to the new, lower tax rate.  Next, permit RRGs to pay immediately pay an estimated three-year-tax today to have their tax rate immediately reduced to the new captive tax rate expected three years from now.

    The benefit of the front loaded tax payment to the insurance department would be that it brings in seed money to develop and hire staff to regulate the new captive insurance industryundefinedmaybe without drawing from the departmental budget.  The benefit to the RRGs is that having a lower NJ tax rate may save them a retaliatory penalty tax in other states.  A retaliatory tax is levied on an RRG when it is paying a higher tax rate in another state.  So if the RRG can lower their NJ tax rate, they might avoid paying a retaliatory tax in other states.

    NJCIA is a member-guided trade association.  Please visit the new NJCIA website for information about association membership and committee or board participation at www.njcia.org or contact Gregg Sgambati at (201) 252-2444 or gregg.s@njcia.org.

  • 07 Apr 2010 8:47 AM | Gregg Sgambati (Administrator)
    Title: FINANCIAL SERVICES: LIFE ANNUITIES, NEW JERSEY STATE LOTTERY
    Solicitation #: 11-X-21376
    Bid Opening: 5/28/2010 2:00 PM

    Please make sure the eBid Email Address: eRFPNotification.Service@treas.state.nj.us is added to your email safe list to ensure you will receive eBid notification emails.

    The Purchase Bureau has advertised a new Request For Proposal (RFP) for 11-X-21376 - FINANCIAL SERVICES: LIFE ANNUITIES, NEW JERSEY STATE LOTTERY

    The RFP is available on our website at the following page:
    If you can not click on the link below, please cut and paste the link into your browser's address bar.

    http://www.state.nj.us/treasury/purchase/bid/summary/11x21376.shtml

    - To download the RFP, scroll down to the link titled Full RFP Text

    If the Full RFP Text is not downloadable on the website at the time you receive this email, it should be available after 1 business day from receipt of this email.

    Vendors are responsible for checking the Division of Purchase and Property Website frequently from the time the RFP is issued to the Bid Opening Date, for any Addenda that may be issued. Addenda will not be emailed to you and will only be posted on the website.

    If you should have any questions regarding this specific solicitation, please send your
    questions by using the online form at: http://eBid.NJ.gov/QA.aspx?SolNumber=11-X-21376

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