David Isenberg, the President of the Professional Insurance Agents of New York and President-elect T.J. Derella recently met with the New York State Insurance Department’s Senior Deputy Superintendent Peter Molinaro and other members of the Department’s “Captive Group” to discuss the NYSID’s support for expanding the New York law on captive insurer formation.
Molinaro’s clear objective is to make New York’s law comparable to that of Vermont and other domiciles where businesses currently are turning to form captives. “The proposed bill, S.2374, would track closely with Vermont’s law in setting criteria for pure captives, group captives and sponsored captives,” said a PIANY bulletin. “Currently, New York’s financial requirements are higher for pure and group captives, and New York’s law does not contain a sponsored-captive option.”
The bill also includes other provisions that are not present in Vermont. It would permit New York City and entities that are part of state government, including the State Insurance Fund, to form captives. S.2374 also would newly allow pure captives to insure companies that maintain a contractual or sub-contractual relationship with the entity (or closely-related entities) that set up the captive, provided such contractors voluntarily elect to participate in the captive.
The PIANY requested the meeting with the NYSID to review questions raised by the bill. Among the issues that concern the organization are: “the degree of regulatory oversight for New York captives and captive managers; the availability and quality of fronting companies; the effect of greater captive formation on other, conventional insurers and marketplace dynamics; the purpose of the bill’s provision authorizing the State Insurance Fund to form a captive; and the amount of disclosure to prospective members of group and sponsored captives about the financial condition and other aspects of the insurers they are considering joining.”
Molinaro opened the discussion by pointing out that virtually any business can form a captive today, by going off-shore or out-of-state. He said New York should offer them the opportunity of doing so under the auspices of the NYSID. Molinaro heads up the NYSID’s five-member Captive Group, which operates a toll-free number at 1-866-NYSCAPT and a dedicated Web site at www.nycaptives.com. Companies can download licensing forms as well as a copy of the current law from the site. The approval process for licensing of a captive insurer is estimated to be 30 days.
He indicated that interest in forming NY Captives has been increasing. The latest approval was for a captive of the Town Sports International (TSI) network of health and fitness clubs, in January 2003. The TSI captive joined New York’s five other licensed captives: Moody’s, the Metropolitan Transportation Authority’s First Mutual Transportation Assurance Co., Columbus-McKennon Inc.’s CM Insurance Company, Inc., and GVP Risk Management Insurance Inc., which insures the risks of MasterCard International Incorporated, its affiliates and subsidiaries.
The bulletin noted that “according to A.M. Best, there were 4,526 total active captives worldwide at year-end 2002, versus 4,521 at the end of 2001,” with a record 462 new captives licensed last year, while 311 captives were liquidated. A recent captive profile by Aon showed Vermont with 560 captives, of which only seven were sponsored captives with protected cells. As of year-end 2002, 82 percent of Vermont’s licensees were pure captives.
It also suggested that person seeking additional information on captives should consult the website: www.captive.com.
Topics New York
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