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Legislative Update - NJ Assembly Passes Captive Insurance Bill
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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Business Insurance.com article:
New Jersey sets roadblock for RRGs insuring taxis
http://www.businessinsurance.com/article/20100606/ISSUE01/306069978
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Editorial
RRGs,
Guaranty Associations, and the Liability Risk Retention Act of 1986
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.