N.J. Poised to Become Captive Insurance Domicile
January 12, 2011 by Sean P. Carr
TRENTON, N.J. January 11 (BestWire) — Backers of a bill to make New Jersey a captive domicile praised its passage as a shot in the arm for the state’s insurance industry.
The bill cleared its final legislative hurdles and is now before Gov. Chris Christie. A Christie spokesman could not say when the governor will sign A. 2360, but industry supporters are hoping for a public signing this month. When signed, it will go into effect after 90 days.
“We’ll start doing what we can to support the industry. We’ll look for some early adopters,” said Gregg Sgambati, president of the New Jersey Captive Insurance Association.
The bill is partially modeled on the law in Vermont, the largest U.S. captive domicile. It borrows from Vermont’s tax structure and capital and surplus requirements, among other common aspects (BestWire, Nov. 1, 2010). New Jersey captives would be subject to minimum capital and surplus requirements of $250,000 for single-parent captives and $750,000 for association captives. Premium taxes would be within a minimum of $7,500 and maximum of $200,000. Direct written premiums taxes would be 0.38% on the first $20 million in premiums, 0.285% on the next $20 million, then 0.19% through $60 million and 0.072% on premiums past that level.
Both houses of the state legislature approved the bill unanimously, with the Assembly and Senate voting on an amended bill Jan. 6.
Sgambati called the process a model of legislative cooperation. He also pointed to a requirement that components of the captive insurance company be managed from within the state.
“It would allow for and also encourage large New Jersey companies with captive insurance subsidiaries to move their captives to New Jersey, creating additional jobs in the insurance industry in New Jersey when every job counts. This bill, quite simply, is a job creation bill that also promotes a good business environment,” bill sponsor and state Sen. Gary S. Schaer, D-Passaic, chairman of the Financial Institutions and Insurance Committee.
The NJCIA is planning an April summit to encourage the formation of captives and “design a timetable” for the state’s captive insurance industry, Sgambati said.
Captives can bring revenue from fees needed to form a captive, plus recurring premium taxes to fund the regulatory infrastructure to govern captives. In 2007, Vermont, the third-largest captive domicile in the world, said its busy captive market brought in just about as much revenue as the state lottery. About 30 states now have captive laws on their books (BestWire, April 5, 2010).
(By Sean P. Carr, Washington Bureau Manager: firstname.lastname@example.org)BN-NJ-01-11-2011 1429 ET #