FOR IMMEDIATE RELEASE
NEW LEGISLATION FACILITATES
FORMATION OF INSURANCE CAPTIVES, PROMOTES ECONOMIC DEVELOPMENT AND NEW BUSINESSES
Bill Allows Sponsored Captives and Greater Flexibility for Corporations and Public Agencies and Authorities to Form Self-Insurance Entities
Superintendent of Insurance Gregory V. Serio and Empire State Development Chairman Charles A. Gargano today announced new legislation allowing a wider range of businesses the opportunity to utilize captive insurance companies to retain, fund, and better manage some of their risk. The proposed bill (Note: this news release updated 3/4/03 to link to latest proposed Senate bill) provides a new risk transfer vehicle, known as a sponsored captive insurance company, which permits various participants to use the same vehicle to self-fund their risks. The bill also creates additional flexibility by lowering the threshold for businesses to form single parent captives and to participate in a group captive. Additionally, public entities that meet appropriate standards will also be permitted to form captives.
"In the contraction of the commercial insurance market around the country, the new legislation gives even more of New Yorks businesses a valuable option by offering the use of captives as an alternative form of insurance," said Serio. "The bill creates greater flexibility and allows businesses and public entities new opportunities to avail themselves to greater choices for more efficiency in managing and financing risk. New York businesses are being forced to look outside of the State to implement their risk management strategies if they involve the formation of captives, the new legislation will curtail that trend."
"This important legislation is yet another example of Governor Pataki working to improve the business climate of New York," said Chairman Gargano. "This initiative will help New York maintain its place as the world's preeminent financial center and our proud designation as the capital of the world."
Governor George E. Pataki signed New Yorks first captive legislation in August 1997, authorizing the formation of captive insurance companies in the State. Captives are created when a business or groups of businesses join to insure or reinsure their own risk. And allowing these insurers and their managers to operate free of most regulatory constraints, serving exclusively the companies or industries that form them.
"The Departments streamlined licensing process will allow New Yorks business community to benefit from captive formation. Once formed, a captive can reduce a business insurance costs by reducing premiums, accessing the reinsurance market, and centralizing the enterprises risk management operation," added Serio. "I encourage the States business community to explore the possibilities and the advantages associated with the creation of captives."
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