FOR IMMEDIATE RELEASE
GOVERNOR PATAKI SIGNS CAPTIVE LEGISLATION PROMOTING ECONOMIC DEVELOPMENT AND NEW BUSINESSES TO THE STATE
Signaling a watershed change in insurance regulatory policy for New York, Governor George E. Pataki has signed legislation authorizing the formation of captive insurance companies in the state. Under the terms of the measure contained in a massive tax reform package, Chapter 389 of the Laws of 1997, starting on January 1, 1998, New York will allow these insurers and their managers to operate free from most regulatory restraints.
Captives, which are formed by a commercial enterprise or industry for the purpose of serving as that business or industrys insurance carrier, are generally free from the regulatory binds placed upon licensed admitted and non-admitted carriers since they service exclusively the companies or industries that form them.
"Captives have become a critical tool for many of New Yorks largest companies in the effective management of risk and liability," Governor Pataki said. "For the first time, these businesses will be able to avail themselves of the benefits of captives without having to go out of state or out of the country to do it."
"There is a new spirit of opportunity for the insurance business in New York and, more importantly, the companies that rely upon a vibrant insurance market to provide adequate coverage in an affordable manner," said Neil D. Levin, Superintendent of Insurance. "Captives should greatly enhance the attraction of New York as the insurance capital of the world."
The bill provides for the following:
- formation of pure (single company) and group captives for companies whose net worth exceeds $100 million;
- insuring and reinsuring of risks of the parent and affiliated companies and the assumption of certain risks from outside companies (restrictions on writing of compulsory coverages limited to primary layers);
- minimum capital and surplus requirements below those of traditional insurers;
- freedom from many other regulatory requirements, such as inclusion in compulsory association (e.g. JUAs), reduced franchise taxes, etc.
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