Measure Would Bring Captive Insurers To New Jersey
TRENTON – Legislation sponsored by Senator Nia H. Gill (D-Essex) to create additional jobs and reduce costs for businesses by permitting captive insurers to operate in the state today cleared the Senate Commerce Committee by a vote of 4 to 0.
The bill (A-2360/S-168) would allow captive insurance companies to apply to the Department of Banking and Insurance for a license to do business in the State in certain lines of insurance, including life and health insurance, annuities, indemnity, property and casualty, fidelity, guaranty and title insurance, and reinsurance. The legislation will promote the growth of an insurance sector that has generated billions of dollars of investment in some states and brought in new high-paying jobs.
“This bill will open an entirely new market for insurance in New Jersey, thereby bringing new businesses to our state as well as additional high-paying jobs,” said Senator Gill, chair of the Commerce Committee. “This is the kind of innovation that will spur economic growth, at a time when it is so desperately needed.”
A captive is a closely-held insurance company established primarily to insure the risk of its parent company. A corporation, for example, could establish a captive insurance company to insure its own workers’ compensation program. This kind of insurance provides significant benefits to its parent company, allowing both flexibility in setting rates and considerable control in managing costs.
“Captive insurers are already operating in more than two dozen states in the country,” said Senator Gill. “By allowing these types of insurers to operate in New Jersey, we would significantly expand our insurance market and draw new businesses and jobs to the state.”
Approximately 27 states and the District of Columbia allow these types of insurance companies to headquarter in their state. Vermont is known as the leader in captive insurance and is the third most common domicile for captives in the world, generating $13 billion in premiums in the state in 2009. New Jersey’s bill is modeled after the Vermont legislation.
The legislation approved today will require that captive insurance companies meet certain requirements, including those relating to formation, capital and surplus, examination, local office presence, ability to meet policy obligations, payment of certain fees and taxes and annual reporting.
The bill would also allow the Department to establish, by regulation, an expedited licensing process for captives currently formed or licensed in other states and that are applying to do business in New Jersey. Streamlining the licensing process will bring new investment to the state sooner.
The measure now heads to the Senate Budget and Appropriations Committee for consideration.