OGC Op. No. 10-12-08
The Office of General Counsel issued the following opinion on December 6, 2010, representing the position of the New York State Insurance Department.
RE: Captive Insurer
May a captive insurer be owned by an entity that is not licensed as an insurer?
A captive insurer may be owned by an entity that is not licensed as an insurer provided that the parent/owner of the captive insurer maintains a net worth in excess of one hundred million dollars, pursuant to New York Insurance Law § 7002 (McKinney 2009).
The inquiry was general in nature and without specific facts.
Insurance Law Article 70 sets forth the provisions for forming and operating a captive insurer. Insurance Law § 7002 is relevant to this inquiry, and reads in pertinent part as follows:
(c) “Captive insurance company” means any pure captive insurance company . . . licensed to do a captive insurance business under the provisions of this article.
* * *
(e) “Industrial insured” means an insured:
(1) whose net worth exceeds one hundred million dollars;
(2) who is a member of a holding company system whose net worth exceeds one hundred million dollars;
* * *
(h) “Pure captive insurance company” means any company that:
(1) is a subsidiary of an industrial insured which is one hundred percent owned by or is a statutory subsidiary of the industrial insured; and
(2) is licensed under the provisions of this article for the primary purpose of providing insurance or reinsurance covering the risks of its parent and affiliated companies.
Thus, pursuant to Insurance Law § 7002, any entity, whether or not licensed as an insurer, may own a captive insurer provided that the parent/owner of the captive insurer maintains a net worth in excess of one hundred million dollars.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.