By DAN REYNOLDS, senior editor of Risk & Insurance®
Backers who hope to create a captive insurance and risk retention group industry in New Jersey are gearing up for that state's fall legislative session. Supporters wager that a domicile could be formed in that state by the end of the year.
If their efforts are successful, New Jersey would become the 26th U.S. captive insurance domicile.
"I did my job by developing and passing the legislation. Now I get to hand it over to other people to do their job to actually put this to work," said New Jersey State Assemblyman Gary Schaer, a Democrat from Passaic, who sponsored A-2360, the legislation enabling a captive industry that cleared the New Jersey General Assembly in June.
While he's pleased that captive legislation passed the Assembly, Gregg Sgambati, the president and founder of the New Jersey Captive Insurance Association, said he would like to see a provision allowing for risk retention groups added to the Senate legislation. Language allowing for risk retention groups was omitted from the June bill that was passed by the Assembly.
Sgambati theorized that it might take some time for regulators in New Jersey to familiarize themselves with risk retention groups. But he hoped that allowances for them can be added to a bill that could be under consideration by the state Senate's finance committee in a matter of weeks.
"We strongly believe they should be included, and we plan to address that with the Senate," Sgambati told Risk & Insurance® in an interview Sept. 3.
Sgambati said that the argument for establishing risk retention groups and captives in the state rests on a simple premise: The industry will create jobs and tax revenue and is in line with Gov. Chris Christie's pro-business agenda.
"I really don't see any negatives," Sgambati said.
A spokesman in the office of Gov. Christie said that the governor hasn't yet weighed in on whether he would sign captive legislation or not. Should both chambers of the legislature pass a piece of legislation, Christie would have 45 days to review it, during which he can either sign it or veto it, the spokesman said. If Christie takes no action, the legislation would become law.
With its location in the middle of the East Coast and the fact that it hosts a good number of Fortune 500 companies, Schaer said, New Jersey is ripe for a captive industry and can only benefit from it.
In addition to being host to such Fortune 500 giants as Johnson & Johnson, Merck, Honeywell and Wyeth, the state also houses one of the most solid domestic property/casualty companies in the Warren, N.J.-based Chubb Group of Insurance Cos.
That said, Schaer added that he knows the state would have a long way to go to rival a domicile like Vermont, which licensed its 900th captive this year and is looked at as the industry's gold standard.
Sgambati, who has a professional history in the captive industry on the service provider side, said that he was motivated to form the New Jersey Captive Insurance Association when a business associate in Arizona asked him about New Jersey's captive insurance law. Sgambati said that he did some research into the issue and found the state didn't have one.
The NJCIA was formed in December 2009 and has about 100 members.
Neighboring states already have captive laws on their books. In 2008, New York had 50 licensed captives, and Delaware had 40 licensed captives.
September 7, 2010
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