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NJ Captive Insurance News

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  • 20 Jan 2012 6:00 AM | Gregg Sgambati (Administrator)
    New Jersey Finishes 2011 with Three Captive Insurance Companies Including a Re-domestication
     
    Mahwah, NJ, January 20, 2012: New Jersey finished 2011 with its third captive insurance company and first re-domestication. The state’s captive insurance law went into effect midyear. After one of the United States’ largest insurance companies formed the first captive in the state in July, captive regulators approved a re-domestication of a captive insurance company owned by the largest terminal operator and stevedore in the United States. 

    Ports America moved its New York pure captive to New Jersey in December. The captive, Ports Insurance Company, Inc., covers longshore workers compensation and liability exposure. According to Ports America, the largest risk transferred to the previous captive was U.S. life and health. In addition, the captive has provided “deductible indemnity coverage” for most other liability exposure, including general liability and Stevedores/terminal operator’s liability. The company is authorized by the U.S. Department of Labor to underwrite longshore workers compensation coverage. 

    The first New Jersey captive insurance company was formed by the Prudential Insurance Company of America. With assets in the billions and as one of New Jersey’s largest corporations, the Prudential captive was an excellent first entrant. The selection of a domicile for a large captive insurance company is a consequence of analysis of expected values, financial or otherwise. Gregg Sgambati, President of the New Jersey Captive Insurance Association believes that Prudential also accounted for the social and community impact of domiciling in its home state, in essence fulfilling the company’s corporate social responsibility mission. "In my mind, Prudential looked at the financial benefits of domiciling in New Jersey and combined that with its impact on the state in terms of tax revenue and development. They decided to build a captive here in New Jersey. That is good for Prudential and good for New Jersey.” 

    It is conceivable that Ports America considered this aspect in its decision to re-domesticate to New Jersey as well. Ports America’s home office is in Jersey City. "By my estimate, the annual premium taxes for these first three New Jersey captives will eventually grow to exceed $450,000," said Sgambati. 

    The second captive was formed by the new owners of Bayonne Medical Center and Hoboken University Medical Center. Shortly after the two institutions were acquired, the owners formed an industrial captive for liability insurance. As a nonprofit medical center, its risk characteristics were different from those of for-profit institutions. Traditional insurance vehicles did not account for these characteristics and their insurance rates were unattractive. Forming a captive insurance company in New Jersey was more cost effective and expedient. The captive managers were impressed by the speed, efficiency, and professionalism of the Captive Insurance Section of the New Jersey Department of Banking and Insurance. 

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    Contact: Gregg Sgambati
    NJCIA
    Phone: (201) 252-2444
    Email: gregg.s@njcia.org
    P.O. Box 202
    Mahwah, NJ 07430
  • 14 Jul 2011 3:07 PM | Gregg Sgambati (Administrator)

    First Captive Insurance Company Licensed in New Jersey

    The New Jersey Department of Banking and Insurance (DOBI) announced the authorization of the state’s first captive insurance company.  Prudential Insurance Company of America was issued a certificate of authority to form a pure captive.  The effective date of the license was July 1.  The captive is named Prudential New Jersey Captive Insurance Company (NJCAP).  According to New Jersey insurance statutes, NJCAP is required to have a New Jersey based management team and board of directors.  NJCAP will be subject to New Jersey captive insurance laws, regulations and oversight. Prudential Insurance Company of America remains subject to the general corporate and insurance laws and regulations of the State.

    New Jersey’s DOBI Commissioner Thomas Considine said, “We welcome Prudential’s new captive insurance company as the first captive in New Jersey and expect many more firms to form new captives or to relocate existing ones here.”  New Jersey established a captive insurance website in May called “Captive Corner.” It provides information for companies seeking to establish captive insurance companies including regulatory guidance, forms and links to admission packets.  It also provides directions for service providers to register as an approved captive insurance company manager, accountant or actuary.  The website URL is www.state.nj.us/dobi/division_insurance/captive/index.html.

    Beverly Barney, Vice President and Actuary for Prudential said, "We are pleased to be the first company to establish a captive for reinsurance purposes in New Jersey, and appreciate the level of collaboration with the New Jersey Department of Banking and Insurance on this initiative." 

    “The New Jersey Captive Insurance Association (NJCIA) is clearly jubilant to see the first captive formed in New Jersey within two months of the law going into effect,” said Gregg Sgambati, President of NJCIA.  It is very suitable that the first captive is owned by one of New Jersey’s largest employers and most recognizable industry names.  Naturally they chose to stay at home and make a greater contribution to New Jersey’s economy.  We are proud of Prudential and congratulate them.”

    In a telephone conversation, Ms. Barney said that Prudential is happy to be establishing a captive in the state of domicile of The Prudential Insurance Company of America, and we look forward to participating in the NJCIA." 

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


          

  • 22 Feb 2011 1:45 PM | Gregg Sgambati (Administrator)

    New Jersey Captive Insurance Legislation Becomes Law

    Trenton, NJ, February 22, 2010:   Governor Christie signed into law legislation that creates a new industry in New Jersey. As of today, New Jersey joins other domestic and international locations to become a captive insurance domicile.  The Governor signed bill A2360 that enables New Jersey to license and regulate captive insurance companies.  Captive insurance companies create a path to new tax revenue, job creation, and economic stimulus as a result of the businesses that set up to provide services to the industry.  In addition, these special insurance companies give existing corporations new reasons to do business in New Jersey. 

    In a statement, Gregg Sgambati, President of the New Jersey Captive Insurance Association (NJCIA) said that the association is "happy to have been a catalyst for getting the legislation passed" but it was the “foresight of the legislators to keep this legislation moving forward that provided the underlying momentum to create this path of industrial development for the state”.  Assemblyman Gary Schaer, Assemblywoman Denise Coyle, Senator Nia Gill, and Senator Thomas Kean, Jr. were the leading primary sponsors.  “The legislative parity of this group makes it clear that this law will be good for New Jersey fiscally and economically,” said Sgambati.

    The bill was passed by both houses on January 6th along with other "Back to Work NJ" bills.  "The fact that this bill passed the Governor's litmus test along with its unanimous passage in both houses is a clear sign that we have an excellent economic opportunity for everyone here," said Sgambati.  Several other bills passed that day were vetoed by the Governor last week.

    The Governor will be working around the state to encourage new industry and business opportunities to show that New Jersey is a business friendly state in 2011.  NJCIA looks forward to seeing the Governor at its inaugural NJ Captive Insurance Summit in the coming months.  The captive insurance law will go into effect in 90 days.

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

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  • 07 Jan 2011 8:51 AM | Gregg Sgambati (Administrator)

    New Jersey Set to Become a Captive Insurance Domicile; Governor expected to sign bill in January

    Trenton, NJ, January 6, 2011:   Bill A2360, Regulates Captive Insurers, passed both houses today and is on its way to Governor Christie for signing.  The bill will make New Jersey a captive insurance domicile.  The law creates a new industry in New Jersey and will take effect 90 days after its enactment.

    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. 

    Association membership is available online are www.njcia.org.  For additional information contact Gregg Sgambati at (201) 252-2444 orgregg.s@njcia.org

  • 06 Jan 2011 5:12 PM | Gregg Sgambati (Administrator)

    New Jersey Senate Passes Bill to Create Captive Insurance Industry

    State is in the home stretch of becoming a captive domicile.

    Trenton, NJ, January 6, 2011:   The New Jersey Senate passed the final bill that will create a captive insurance domicile in New Jersey.  The bill is headed to the Assembly for a concurrence vote that is expected to be approved today.  Passage in the Assembly will mean that the bill will be ready to go the Governor for passage into law.  Further details will be provided as they become available.

    For more information, please contact Gregg Sgambati at (201) 252-2444 or gregg.s@njcia.org.

  • 07 Dec 2010 2:21 PM | Gregg Sgambati (Administrator)

    Trenton, NJ, December 7, 2010:   The Senate Commerce Committee approved the Senate version of the bill that will create a captive insurance industry in New Jersey.  The New Jersey Captive Insurance Association testified at the committee meeting yesterday.  The bill passed without opposition.  The bill has been referred to the Senate Budget and Appropriations Committee and is scheduled for consideration on December 8th.

    The bill requires approval by the Senate Budget and Appropriations Committee and passage by the full Senate which will meet for voting sessions on December 13th and December 20th.  If the Senate votes in favor of the bill it will be referred back to the Assembly for another vote, as amended by the Senate.  The Assembly has a session scheduled on December 13th.  The January session has not been scheduled.  An additional December session is a possibility.

    The bills prime sponsor's (Assemblyman Gary Schaer, Assemblywoman Denise Coyle, Senator Nia Gill, and Senator Thomas Kean, Jr.) are leading New Jersey to pass a bill that will be "modernizing our laws to stay competitive with other states while also making our state more business friendly," said Schaer in a statement.  “Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent,” Schaer said.  “It’s a smart approach as we look to promote economic growth and create jobs.”

    The theme of creating new business and job opportunities was shared by all sponsors.  The state's executive leadership promotes New Jersey with the tagline "Taking Care of Business."  "Clearly our legislators are keen to the power of inciting private sector drive while maintaining an acute public sector consciousness," said Gregg Sgambati, President of the New Jersey Captive Insurance Association.  "This illustrates a successful application of the rationalized thinking that we have talked about at the federal level.  It will be good for New Jersey."

    Captive industry formation has been a part of the Department of Banking and Insurance's strategic plan for 2010.  The Department has plans for an energetic but prudent entre into the industry and already acknowledges that ongoing legislative enhancements are a part of the playing field.  A progressive approach is the best approach with a progressive industry.

    NJCIA is the trade association for the future captive insurance industry in New Jersey.  For more information and membership please see us atwww.njcia.org or contact Gregg Sgambati at (201) 252-2444 or gregg.s@njcia.org.

  • 27 Oct 2010 8:47 AM | Gregg Sgambati (Administrator)

    Trenton, NJ, October 25, 2010:   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 investigation and 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 gregg.s@njcia.org.


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  • 29 Jun 2010 9:17 AM | Gregg Sgambati (Administrator)

    New Jersey Bill to Regulate Captive Insurers Passes Assembly

    Trenton, NJ, June 28, 2010:   In an assembly meeting that continued into the hours past midnight, Assembly Bill A2360 to Regulate Captive Insurers passed with amendments.  The bill, sponsored by Assemblyman Gary Schaer, Assemblywoman Denise Coyle, and Assemblyman John McKeon, brings New Jersey another step closer to becoming a captive insurance domicile.

    The senate version of the bill (S168) remains with the Senate Finance Committee which was originally sponsored solely by Senator Nia Gill but now has the additional co-sponsorship of Senator Thomas Kean, Jr. 

    Gregg Sgambati, President of the New Jersey Captive Insurance Association (NJCIA) says that if bill S168 can move out of the Senate Committee at one of the upcoming committee meetings, we could see New Jersey become a captive domicile this year.  The addition of Senator Thomas Kean, Jr. as a co-sponsor will add momentum to the bill’s progress.  Senator Kean has sponsored other economic bills that he says, “meet the challenges of the 21st century economy and workplace.”

    The assembly bill was passed without the inclusion of risk retention groups.  Risk retention groups (RRGs) account for around 15% of captive insurance company formations.  “Although not having RRGs in the legislation is not ideal, it should not be misconstrued as an indication of low enthusiasm for this legislation by state regulators, who are in fact, very enthusiastic about captive insurance”, said Sgambati.  “This is a stepped approach to ramping up a promising new domicile.”

    NJCIA will continue to promote the merits of including RRGs in the Senate version of the bill which currently has language that includes them.  RRGs are often the first captive insurance companies to form in a new domicile.

    NJCIA’s first goal is to see the passage of captive legislation that will make New Jersey a captive insurance domicile.   With each step closer to captive legislation, NJCIA continues to increase activities to promote captive insurance in New Jersey.  Please visit the new NJCIA website for information about association membership and committee participation at www.njcia.org or contact Gregg Sgambati at (201) 252-2444 or gregg.s@njcia.org.

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  • 01 Jun 2010 11:37 AM | Gregg Sgambati (Administrator)

    On Thursday, May 27th, Senate Bill No. 1823 (Make sundry changes to taxicab laws) was on the Senate Transportation Committee’s agenda for discussion and possible vote.  The bill was held back from presentation and voting so that it could be reviewed for possible amendments outside of the committee meeting.  This fulfilled one objective on the New Jersey Captive Insurance Association’s (NJCIA) government advocacy agenda. 

    The bill requires taxicab owner to have an insurance policy of an admitted insurance company which is a member of the New Jersey Property-Liability Insurance Guaranty Association.  This requirement would eliminate risk retention groups (RRGs) as an insurance option for taxicab owners.  The exclusion of RRGs, a form of captive insurance company, runs counter to NJCIA member’s interests.  But another issue may be more contentious.

    The bill appears to go head-to-head with the federal Liability Risk Retention Act of 1986.  Section 3902 of the act says that a risk retention group is exempt from any state law, rule, regulation, or order to the extent that such law, rule, regulation, or order would require or permit a risk retention group to participate in any insurance insolvency guaranty association to which an insurer licensed in the state is required to belong.  Section 3902 prohibits a state from requiring an RRG to participate in a guaranty association and it prevents a state from permitting an RRG to participate in a guaranty association.  This makes one wonder about the bill-drafters original intentions.

    There are at least three RRGs providing insurance to taxicab owners in New Jersey that are not members of the New Jersey Property-Liability Insurance Guaranty Association.  If Senate Bill 1823 is passed as it currently stands--then it appears to put these RRGs out of the taxicab business in New Jersey.

    NJCIA believe that the legislative concern with taxicab RRGs should be resolved without preventing RRGs from continuing to provide insurance to taxicab owners.  RRGs give taxicab owners an additional option for purchasing insurance and they presumably bring greater competition to the market which in-turn should mean lower costs. Obviously, if there is a conflict with the Liability Risk Retention Act of 1986, this needs to be addressed too.  NJCIA's top priority is to see that New Jersey has a user-friendly environment in its future captive insurance industry--a key to a successful captive insurance domicile. 

  • 21 May 2010 10:01 AM | Gregg Sgambati (Administrator)

    May 20, 2010, Trenton, NJ – The Assembly Session ended today without seeing Bill A2360 “Regulates Captive Insurers” presented to the full Assembly for vote.  The assembly will have another session in June at which time the bill may be presented again.

    "This is not a setback", said Gregg Sgambati of NJCIA.  “Presently, we are talking with legislatures to make an important change in the final bill.”  In the last amendment, the risk retention groups (RRGs) were deleted from the bill.  They were not excluded--wording related to them was deleted.  NJCIA believes that this is a potentially concerning issue with the legislation. The decision to license or not license RRGs should be left with the regulator, not statute.  Once a captive insurance regulatory team is in place at the New Jersey Department of Banking Insurance, prudent decisions about captive licenses will be made.

    The Assembly Financial Institutions and Insurance (AFI) Committee voted to move the bill “Regulates Captive Insurers” forward to the full Assembly for vote on May 6, 2010.  The Senate version of the bill still requires committee vote and NJCIA is diligent in seeing it considered soon.  Senator Nia H. Gill chairs the Senate Commerce Committee.

    NJCIA is the trade association for the future captive insurance industry in New Jersey.  For more information, please visit the new website at www.njcia.org.  Membership is now open to industry participants. 

    For more comments on legislation, information about NJCIA, or interest in NJCIA boards and committees and membership, please contact Gregg Sgambati at gregg.s@njcia.org or (201) 252-2444.

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